As we have noted previously, the U.S. Securities and Exchange Commission’s recently proposed rules governing climate-related disclosures, if adopted as proposed, would represent a sea change to the existing public-company disclosure regime.
We focus here on the corporate-governance aspects of the proposed rules to help public company boards, executive management and in-house attorneys begin to focus on the governance-related issues they may face and steps they may want or need to take in preparing for the potential adoption of the rule.
Governance-Related Requirements of the Proposed Rules The proposed rules would add a new Subpart 1500 to Regulation S-K setting forth the new non-financial statement climate-related disclosure requirements, including Item 1501 relating specifically to governance at both the board and management levels.
Proposed Item 1501(a) would require companies to describe the board of directors’ oversight of climate-related risks, including the following, as applicable to a particular company:
the identity of any board members or board committee responsible for the oversight of climate-related risks;
whether any member of the board has expertise in climate-related risks and a description of the nature of the expertise;the processes by which the board or board committee discusses climate-related risks, including how the board is informed about climate-related risks, and the frequency of such discussion;
whether and how the board or board committee considers climate-related risks as part of its business strategy, risk management and financial oversight; and whether and how the board sets climate-related targets or goals and how it oversees progress against those targets or goals, including the establishment of any interim targets or goals.
Proposed Item 1501(b) would require companies to describe management’s role in assessing and managing climate-related risks, including the following, as applicable to a particular company:
whether certain management positions or committees are responsible for assessing and managing climate-related risks;
if such positions or committees exist, the identity of the positions or committees and the relevant expertise of the position holders or committee members;the processes by which such positions or committees are informed about and monitor climate-related risk; and
whether and how frequently such positions or committees report to the board or a committee of the board on climate-related risks.
As with other parts of the proposed rules, Item 1501 would permit, but not require, a company to provide disclosures regarding the board’s oversight and management’s assessment and management of climate-related opportunities, if applicable, in addition to climate-related risk.Corporate Governance Considerations Under the SEC’s Proposed Climate Disclosure Rules | Bracewell LLP – JDSupra