Many public companies report their climate risks and carbon emissions in a bid to be more transparent about their environmental, social, and governance efforts. Although this is a voluntary exercise, it may soon be mandatory.

Is your bank prepared for this change?

The new climate change regulations

On March 21st this year, the U.S. Securities and Exchange Commission (SEC) issued draft regulations that make it mandatory for public companies to report their climate risks and carbon emissions. These regulations are not final and still require a 60-day review period before issuing the final rules. That should happen by the end of this year, and a three-year phase-in period would begin in 2023.

The new rulings would mean that companies would have to:

  • Explain how climate risks affect strategies and operations
  • Share their emissions (larger companies will need those numbers confirmed by independent parties)
  • Share indirect emissions
  • If companies make public promises to reduce their carbon footprint, they will need explain how they plan to fulfil these promises

How these regulations came about

The SEC has explained that they are doing this in response to investors’ needs to know about climate-related risks that will have financial consequences.

The SEC drew up these draft regulations based on industry feedback gathered in 2021. Aside from the Sustainability Accounting Standards Board’s (SASB) industry standards and materiality guidance, the new disclosure requirements are modeled mainly on the voluntary framework that the Task Force on Climate-Related Financial Disclosure (TCFD) put forth.

Over 2,600 companies have already adopted that framework, so if yours is one of them, you will not have difficulty adjusting to the new SEC regulations.

Climate Change Regulations

Why now?

There are many reasons that the SEC decided that this was the right time to draw up these regulations. They include:

  • Financial risk for companies – companies face many risks associated with climate change and its repercussions. Natural disasters, changing consumer preferences and changing regulations as the states and countries that they’re in try to reduce carbon and greenhouse gas emissions.
  • Concerned investors – companies’ responses to climate risks directly affect their financial performance. Investors need to have this information so that they can make informed decisions.
  • Inadequate climate reporting – many companies report their climate issue-related information voluntarily, but these reports vary in format and understandability, are inconsistent, and sometimes even misleading.
  • The impact of companies on the environment – when it comes to reducing the effects of climate change, the onus has fallen to the individual to affect climate change, many believe the change must come from larger entities.

What this means for businesses

92% of Fortune 500 companies already disclose data that reflects climate issues and publish environmental reports, but they currently do so in various formats as it’s voluntary. Regulation will give companies uniform reporting requirements, making the process straightforward. Additionally, these measures will ensure that disclosures are complete and consistent.

The right technology will be needed to make the transition, uptake, and upkeep of these regulations smooth. Technology can also help your company use the data you’ve collected to differentiate your business and power your strategic and operational planning.

Tackling regulations with the right technology: CPQi

Here at CPQi, we know all about having to evolve with the times. As the global narrative shifts to place more value on more environmentally-conscious initiatives, we’re passionate about helping green banking become more easily achievable.

We have the abilities and facilities to help you improve your climate change impact and comply with any new regulations. Get in touch with us today to start transforming your bank into a cleaner, greener one.

Book a Consultation Today