SEC to update climate disclosure guidance as IOSCO backs development of global sustainability framework

US and global regulators set out positions on sustainability-related disclosures

The US Securities and Exchange Commission (SEC) is set to review and update its decade-old ‘interpretative’ guidance on climate-related corporate disclosure requirements, according to a statement by acting SEC Chair Allison Herren Lee.

The regulator will examine the extent to which companies are already complying with the guidance, assess current disclosure obligations under federal securities law and launch engagement initiatives on the topic. Insights from this preparatory work will be used to update the guidance, first issued in 2010 during the tenure of former Chair Mary Schapiro, who is now Secretariat for the global disclosure framework the TCFD.

While the guidance itself is non-binding and does not introduce any new legal requirements, it provides a basis for companies to identify scenarios in which climate disclosure obligations may be triggered. Specifically, the guidance refers to the introduction of international climate change accords, disruptions due to the physical impact of climate change, the scope of current and pending climate change legislation, and the impact of legal, technological or other developments related to climate change.

IOSCO said yesterday that it sees “an urgent need for globally consistent, comparable, and reliable sustainability disclosure standards”

The review of the guidance will be conducted by the SEC’s Division of Corporation Finance, which is responsible for overseeing SEC filings and issuing interpretative guidance.

The newly-announced project is the first substantive move by the SEC to address climate-related disclosures since it issued the 2010 guidance. Last year, the SEC under Chair Jay Clayton completed a long-awaited overhaul of disclosure regulations in a bid to modernise and simplify existing rules; but the regulator was criticised for failing to acknowledge climate risks and other sustainability aspects such as diversity in the review.

Since then, the SEC has faced down calls from a regulator-commissioned advisory group and two of its own advisory committees to establish standardised rules for ESG reporting and disclosures. It is yet to take these recommendations forward.

Separately, the board of regulatory body the International Organization of Securities Commissions (IOSCO) said yesterday that it sees “an urgent need for globally consistent, comparable, and reliable sustainability disclosure standards”, announcing plans to support current efforts by the IFRS Foundation to devise a framework for climate-related disclosures.

The Madrid-based Foundation, which is the largest accounting standard-setter in the world, has proposed establishing a Sustainability Standards Board (SSB) to sit alongside the International Accounting Standards Board and oversee the future development of global sustainability disclosure standards.

In a statement, IOSCO said it will engage the IFRS Foundation to ensure that forthcoming standards will be able to command sufficient market acceptance, are compatible with existing accounting standards and will form the basis of an audit and assurance framework.

Internally, IOSCO said it had identified a number of priority areas for improvement, namely encouraging common international standards for sustainability-related disclosure across jurisdictions, and supporting the use of industry-specific quantitative metrics in corporate sustainability disclosures.

Work in these areas will be carried out by IOSCO’s Sustainable Finance Task Force which was established in 2020 and chaired by Erik Thedéen, Director General of Sweden’s securities regulator, Finansinspektionen.