Last week the SEC adopted final rules “to enhance and standardize climate-related disclosures by public companies and in public offerings.” The disclosure, which will be included in registration statements and annual reports, will draw, in part, on disclosures provided for under the Task Force on Climate-Related Financial Disclosures and the Greenhouse Gas Protocol. Importantly, in response to public feedback, the SEC has jettisoned the mandate for Scope 3 GHG emissions reporting; the final rules require disclosure of Scope 1 and/or Scope 2 GHG emissions on a phased-in basis only by accelerated and large accelerated filers and only when those emissions are material. Companies will also be allowed more time to file their emissions disclosures. This post is Part II of a revision and update of my earlier post on the climate disclosure rules, which described the background of these rules, various changes from the proposal in the final rules that were identified in the adopting release, and the Commissioners’ statements at the open meeting at which the rules were adopted. Part I covered various aspects of the proposal other than the sections on GHG emissions disclosure and attestation and financial statement information. This post addresses GHG emissions disclosure and attestation. Financial statement information will hopefully be covered in separate subsequent post.
Here are the final rules—an overwhelming 886 pages!—the fact sheet and the press release.
GHG Emissions Disclosure (Item 1505)
Under the proposed rules, companies would have been required to disclose their GHG emissions, based on the three scopes set forth in the GHG Protocol, for their most recently completed fiscal years and for the historical fiscal years included in their consolidated financial statements, to the extent that historical GHG emissions data was reasonably available. All registrants would have been required to report Scopes 1 and 2, and registrants, other than SRCs, would have been required to disclose Scope 3 emissions, but only if Scope 3 emissions were material or if they had set GHG emissions reduction targets or goals that included Scope 3 emissions. The proposal defined the scopes in a manner similar to the GHG Protocol, with Scope 3 defined as “all indirect GHG emissions not otherwise included in a registrant’s Scope 2 emissions that occur in the upstream and downstream activities of a registrant’s value chain.” Because Scope 3 emissions typically result from the activities of third parties in the value chain, making collection of data more difficult, the SEC had limited the proposed Scope 3 requirement.
Some commenters favored the emissions disclosure because the disclosure would provide investors with specific metrics to assess exposure to transition risks and, in many cases, they already provided the data. (The SEC notes that, according to the TCFD, “only 30% of North American companies surveyed reported their Scopes 1, 2, and 3 emissions in 2021.”) In addition, some commenters suggested that Scope 3 emissions disclosure was necessary to provide a complete picture of a transition risk exposure, and that, because other reporting regimes already require disclosure of Scope 3 emissions, the additional cost burden will be minimal. However, although “many commenters, including both issuers and investors, stated that they supported requiring Scope 1 and 2 disclosures, a significant number of commenters raised serious concerns about requiring Scope 3 emissions disclosures,” questioning the SEC’s authority, the reliability of the metric and the burden on non-public companies in the value chain.
And many commenters opposed any mandatory GHG emissions disclosure, arguing that it would require disclosure even when not material. In addition, some commenters contended, the SEC’s proposed emissions disclosure was not necessary and could be confusing“; moreover, they said, registrants producing 85 to 90 percent of the emissions in the United States already report their emissions pursuant to the EPA’s Greenhouse Gas Reporting Program.” Not to mention the high costs of providing the data, which they contended the SEC was seriously underestimating.
Final rules—general. Because investors consider GHG emissions disclosures to be “a central measure and indicator of the registrant’s exposure to transition risk [and] progress towards a registrant’s own climate-related targets or goals,” and because the information would help investors understand the “impact of transition risk and related targets and goals on a registrant’s business, results of operations, financial condition, and prospects,” the SEC included in the final rules a Scopes 1 and 2 emissions disclosure requirement, but added some limitations. In response to comments, Scopes 1 and 2 GHG emissions disclosure will be required only by large accelerated filers and accelerated filers that are not smaller reporting companies or emerging growth companies, on a phased-in basis, but only if those emissions are material. Disclosure will be required for the company’s most recently completed fiscal year and, to the extent previously disclosed in a prior SEC filing, for the historical fiscal years included in the consolidated financial statements in the filing. The SEC believes that this approach will provide investors with necessary information while limiting cost and disclosure of immaterial information.
When are emissions considered material ? The adopting release confirms that traditional notions of materiality under the Federal securities laws apply: “Thus, materiality is not determined merely by the amount of these emissions. Rather, as with other materiality determinations under the Federal securities laws and Regulation S-K, the guiding principle for this determination is whether a reasonable investor would consider the disclosure of an item of information, in this case the registrant’s Scope 1 emissions and/or its Scope 2 emissions, important when making an investment or voting decision or such a reasonable investor would view omission of the disclosure as having significantly altered the total mix of information made available.” For example, Scopes 1 and/or 2 emissions may be material because they reveal “whether those emissions are significant enough to subject the registrant to a transition risk that will or is reasonably likely to materially impact its business, results of operations, or financial condition in the short- or long-term.” Or, they may be material if they provide insight into the level of progress the company has made toward achieving a target or goal or a transition plan that the company is required to disclose under the final rules. On the other hand, “the fact that a registrant is exposed to a material transition risk does not necessarily result in its Scope 1 and Scope 2 emissions being de facto material to the registrant. For example, a registrant could reasonably determine that it is exposed to a material transition risk for reasons other than its GHG emissions, such as a new law or regulation that restricts the sale of its products based on the technology it uses, not directly based on its emissions.” The SEC acknowledged that companies could incur substantial “costs to assess and monitor the materiality of their emissions, even in situations in which they ultimately determine that they do not need to provide disclosure.”
Under the final rules, Scope 1 emissions are defined as “direct GHG emissions from operations that are owned or controlled by a registrant,” and Scope 2 emissions are defined as “indirect GHG emissions from the generation of purchased or acquired electricity, steam, heat, or cooling that is consumed by operations owned or controlled by a registrant.” (There is no definition in the final rules of Scope 3 emissions because disclosure of Scope 3 emission is not required in the final rules.) The SEC “intend[s] these definitions to include substantially similar emissions as those measured pursuant to the ISO standards,” and notes that companies will “have flexibility to leverage standards of their choice in calculating and disclosing GHG emissions metrics required by the final rules, including the GHG Protocol or relevant ISO standards, or other standards that may be established over time.”
As noted above, in light of the burdens it would impose and concerns about reliability of the data, the final rules do not require disclosure of Scope 3 emissions at this time. The SEC observed that Scope 3 calculation methodologies may continue to evolve, mitigating many of the concerns, which may encourage more companies to disclose their Scope 3 emissions voluntarily.
Commenters had indicated that SRCs and EGCs would face the greatest costs and burdens to comply with the GHG emissions disclosure requirement. In response, consistent with the concept of scaled disclosure, the SEC exempted SRCs and EGCs from any requirement to disclose GHG emissions, including Scopes 1 and 2 emissions, in the final rules. They will still need to comply with the other climate disclosure requirements. Believe it or not, there’s also a special exemption for manure management systems (required as a result of prior legislation).
Presentation of the GHG emissions metrics and disclosure of underlying methodologies and assumptions. The proposed rules had required disclosure of substantial detail regarding these emissions, including, for example, disaggregation by each constituent greenhouse gas, disclosure in gross terms and in GHG intensity, as well as methodology, significant inputs and significant assumptions. In addition, the SEC’s proposed approach to setting organizational boundaries differed from that set by the GHG Protocol. Companies were permitted to use reasonable estimates so long as they also described the assumptions underlying the estimates and their reasons for using them.
Commenters expressed mixed views on the proposed requirement to disclose GHG emissions on both an aggregated and disaggregated basis. Many supported the proposed methodology disclosure, and many also commented that a company should be allowed to follow the GHG Protocol’s approach to organizational boundaries. Some also advocated allowing disclosure of emissions net of offsets. There were also mixed views on the proposed carbon intensity disclosure.
The final rules modify the proposed requirement for disaggregated disclosure, requiring disclosure of Scope 1 emissions and/or Scope 2 emissions separately in terms of CO2e (carbon dioxide equivalents), with each Scope expressed in the aggregate. In addition, if any of the constituent gases of the disclosed emissions is individually material, the final rules require disaggregated disclosure of that constituent gas. For example, if the constituent gas is included in a target disclosed under the rules, that gas may be material. In addition, under the final rules, emissions must be disclosed in gross terms, excluding the impact of any purchased or generated offsets. The SEC contends that understanding the degree to which a company’s “strategy relies on offsets is increasingly important for investors not only because their use exposes the registrant to offset market fluctuations but also because such use may indicate heightened transition risk exposure to the extent governments seek to regulate their use.”
Because companies rarely calculate emissions by directly monitoring the concentration and flow rate at the source—which would be the most accurate method—companies need to select approaches to calculation of GHG emissions. As under the proposal, the final rules require a description of the “methodology, significant inputs, and significant assumptions used to calculate the registrant’s disclosed GHG emissions,” modified, however, to provide more flexibility in the presentation. For example, an initial step in calculation of Scopes 1 and 2 emissions is setting “organizational boundaries,” that is, setting the “boundaries that determine the operations owned or controlled by a registrant for the purpose of calculating its GHG emissions.” Under the proposal, organizational boundaries were required to be the same as those used in the financial statements. While, under the final rules, a company will still need to disclose its organizational boundaries used for emissions calculations, it will not be required, as proposed, to use the same organizational boundaries as used in its financial statements, but instead may use another method, (such as a method under the GHG Protocol). In that event, it must disclose the method used and, if different from the financials, provide a brief explanation of this difference in sufficient detail for a reasonable investor to understand.
Companies will also need to briefly discuss, in sufficient detail for a reasonable investor to understand, the “operational boundaries” used, that is, the “boundaries that determine the direct and indirect emissions associated with the business operations owned or controlled by a registrant.” The description should include the approach to categorization of emissions and emissions sources, to help investors understand how the company determined which sources of emissions to include when calculating Scope 1 and Scope 2.
The final rules also require a brief description, in sufficient detail for a reasonable investor to understand, of the protocol or standard used to report the GHG emissions, “including the calculation approach, the type and source of any emission factors used, and any calculation tools used to calculate the GHG emissions.” Instead of requiring a lengthy explanation of the calculation approach, the company must disclose “whether it calculated its GHG emissions metrics using an approach pursuant to the GHG Protocol’s Corporate Accounting and Reporting Standard, an EPA regulation, an applicable ISO standard, or another standard.” Companies should also disclose the method of calculation of their Scope 2 emissions (which may differ from the method used to calculate Scope 1 emissions), such as the “location-based method, market-based method, or both.” Companies will also need to disclose the ”identity of any calculation tools used, such as those provided by the GHG Protocol or pursuant to GHG emissions calculation under the ISO standards.” The final rules do not require the disclosure of any quantitative emission factors used, but rather require disclosure of “the type and source of any emission factors used, such as the EPA’s emission factors for stationary combustion and/or mobile combustion of various fuel types.”
In a change from the proposal, the final rules will not require disclosure of GHG emissions in terms of intensity. As proposed and as is common practice, the final rules allow the use of reasonable estimates when disclosing GHG emissions, so long as the disclosure also includes a description of the assumptions underlying the estimates and the company’s reasons for using them.
Timeline for reporting GHG emissions metrics. Under the proposal, disclosure of GHG emissions as of the end of the most recently completed fiscal year was required in the Form 10-K and in a registration statement filed subsequent to the compliance date for the climate-related disclosure rules. Many commenters opposed the proposed timing requirement, arguing that much of the necessary data would not be available on a timely basis.
In response to many comments that companies may have difficulty measuring and reporting their GHG emissions as of fiscal year-end by their Form 10-K deadlines, the final rules provide that any GHG emissions metrics required under Item 1505 in a Form 10-K may be incorporated by reference from the company’s second quarter Form 10-Q in the immediately following fiscal year or in an amended 10-K filed by the 10-Q due date. A company must include an express statement in its annual report indicating its intention to incorporate by reference or amend its filing for this metrics information and for any accompanying attestation report. For registration statements, the GHG emissions metrics must be provided as of the most recently completed fiscal year that is at least 225 days prior to the date of effectiveness of the registration statement.
Comparable treatment is provided for FPIs; under the final rules, GHG emissions metrics may be disclosed in an amendment to an annual report on Form 20-F—not a Form 6-K (for liability purposes)—which must be filed no later than 225 days after the end of the fiscal year to which the GHG emissions metrics disclosure relates.
Under the proposal, companies would have been required to disclose their GHG emissions for their most recently completed fiscal years and for the historical fiscal years included in their consolidated financial statements, to the extent that historical GHG emissions data was reasonably available. Under the final rules, companies that are required to disclose their Scope 1 and/or Scope 2 emissions must disclose them for their most recently completed fiscal years and for any historical fiscal years in the SEC filing that have previously been disclosed in prior SEC filings; i.e., if emissions for a prior fiscal year have not already been disclosed in an earlier filing, there is no requirement to disclose them now.
Attestation Over GHG Emissions Disclosure (Item 1506)
Overview. Under the proposed rules, large accelerated filers and accelerated filers would have been required to include in their relevant filings attestation reports covering the Scope 1 and Scope 2 emissions disclosure, as well as related disclosures about the attestation service provider. Requirements were also proposed regarding the attestation service provider and the engagement and attestation report. Attestation at a “limited assurance” level was required for the second and third fiscal years after the emissions disclosure compliance date and at a “reasonable assurance” level for fourth fiscal year and beyond. Although many companies have voluntarily obtained assurance, the SEC said, practices have been “varied with respect to the levels of assurance provided (e.g., limited versus reasonable), the assurance standards used, the types of service providers, and the scope of disclosures covered by the assurance.” Currently, limited assurance is the most common level of assurance provided in the voluntary assurance market for climate-related disclosure.
Views from commenters were again mixed, with some arguing that assurance would increase reliability and accuracy, and others arguing that the costs would outweigh the benefits, and that neither the TCFD nor the GHG Protocol require attestation. Some also contended that assurance would be difficult in light of the level of judgment and uncertainty in the GHG disclosures; some commenters urged the SEC to adopt the GHG verification process used by the EPA in lieu of the proposed assurance requirements. However, the SEC observed that the practice of GHG assurance has been developing over time, and determined that independent, third-party assurance would be a more appropriate model for the final rule than the EPA process.
Under the final rules, companies, including FPIs, that are required to disclose Scope 1 and/or Scope 2 emissions under the rules will be required to provide an attestation report, which should accompany the filing emissions disclosure to which the report applies (i.e., if the disclosure is in a Q2 10-Q, the attestation would accompany it in the 10-Q). However, the requirement and the type of assurance will be phased in. For large accelerated filers (emissions disclosure compliance in fiscal 2026), the compliance date for limited assurance will be fiscal 2029 and the compliance date for reasonable assurance will be 2033. For accelerated filers (emissions disclosure compliance in fiscal 2028), the limited assurance compliance date is fiscal 2031; reasonable assurance will not be required. (Given that SRCs and EGCs are exempt from emissions disclosure, they will obviously also be exempt from the attestation requirement.)
Companies that provide voluntary assurance over their GHG emissions disclosure prior to the first required fiscal year for limited assurance must comply with paragraph (e) of Item 1506, which requires certain disclosures (discussed below). For fillings made after the first required fiscal year for limited assurance, any voluntary assurance obtained that is in addition to required assurance must follow the requirements of paragraphs (b) through (d) of this section and must use the same attestation standard as the required assurance over Scope 1 and/or Scope 2 emissions disclosure.
GHG emissions attestation provider requirements (Item 1506(b)). Under the proposal, the attestation provider was required to be an expert in GHG emissions by virtue of having significant experience in measuring, analyzing, reporting or attesting to GHG emissions. In addition, the provider was required to be independent, according to standards modeled on the SEC’s qualifications for accountants. The proposed rule stated that a provider was “not independent if, during the attestation and professional engagement period, such attestation provider is not, or a reasonable investor with knowledge of all relevant facts and circumstances would conclude that such attestation provider is not, capable of exercising objective and impartial judgment on all issues encompassed within the attestation provider’s engagement.” In determining independence, the SEC would consider, in addition to all other relevant circumstances, including all financial or other relationships between the attestation provider and the registrant, whether “a relationship or the provision of a service creates a mutual or conflicting interest between the attestation provider and the registrant (or any of its affiliates), places the attestation provider in the position of attesting to such attestation provider’s own work, results in the attestation provider acting as management or an employee of the registrant (or any of its affiliates), or places the attestation provider in a position of being an advocate for the registrant (or any of its affiliates).” A consent would be required for inclusion of the report and the provider would be subject to liability under the Federal securities laws.
In the final rules, the SEC adopted the GHG emissions attestation provider requirements substantially as proposed. The SEC believes that the expertise requirements are necessary to help ensure that the attestation provider “has sufficient competence and capabilities necessary to execute the attestation engagement.” The SEC retained the principles-based approach to provide the flexibility “to hire a non-accounting firm that may have relevant or specialized experience with respect to assuring GHG emissions disclosure” and the “requisite expertise to perform the engagement in accordance with professional standards.” The final rules apply the expertise requirement to the signer of the attestation report.
To help ensure that the attestation provider will perform the engagement in an objective and impartial manner, the SEC also adopted each of the proposed independence requirements. Although, unlike Rule 2-01(c) for accountants, the final rules do not identify a number of circumstances that would be inconsistent with independence, “the foundational principles underlying the independence requirements in Rule 2-01 and the final rules are the same, and [the SEC views] the independence requirements in the two contexts as providing similar, if not equivalent, protections to investors.” It’s worth noting that the SEC believes that “it would be difficult for an expert that has assisted a registrant in calculating or preparing its GHG emissions data to meet the independence requirements”; as a result, a company that hires “a third-party service provider to help it calculate or prepare its GHG emissions disclosure may have to pay a fee to both the third-party service provider and to its GHG emissions attestation provider.” The company may use the auditor of its financial statements to perform the GHG emissions attestation engagement; the auditor would be required to comply with applicable, existing pre-approval requirements.
Reports at a limited assurance level (as opposed to a reasonable assurance level) will not be considered part of the registration statement prepared or certified by an expert within the meaning of Sections 7 (consents) and 11 (liability) of the Securities Act. Although no consent will be required under Section 7, the final rules will require companies to file as an exhibit to certain registration statements and periodic reports incorporated into these registration statements a letter from the attestation provider that “acknowledges its awareness of the use in certain registration statements of any of its reports which are not subject to the consent requirement of section 7.” The SEC recognizes that, as a result of the absence of “expert” characterization, underwriters may face additional due diligence costs.
GHG emissions attestation engagement and report requirements (Item 1506(a)(2) and (c)). Under the proposed rules, the attestation report would have been required to be included in the “Climate-Related Disclosure” section of the filing and provided under “standards that are publicly available at no cost and are established by a body or group that has followed due process procedures, including the broad distribution of the framework for public comment.”
The final rules provide that “the attestation report must be provided pursuant to standards that are established by a body or group that has followed due process procedures, including the broad distribution of the framework for public comment.” The SEC believes that “due process procedures would help to ensure that the standards upon which the attestation engagement and report are based are the result of a transparent, public, and reasoned process.” In addition, the standards must be “either (i) publicly available at no cost, or (ii) widely used for GHG emissions assurance.” The SEC believes that the PCAOB, AICPA, IAASB and ISO (re GHG emissions) standards meet these requirements, and others may also be suitable.
As proposed, the final rules require the form and content of the attestation report to follow the requirements set forth by the attestation standard used, but, in a change from the proposal, do not prescribe minimum report requirements.
Finally, in response to requests, the SEC clarifies that the final rules
“apply on a prospective basis only with disclosure for historical periods phasing in over time. Specifically, in the first year that an AF or LAF is required to provide an attestation report, such report is only required to cover the Scope 1 and/or Scope 2 emissions for its most recently completed fiscal year. To the extent the AF or LAF disclosed Scope 1 and/or Scope 2 emissions for a historical period, it would not be required to obtain an assurance report covering such historical period in the first year of the attestation rule’s applicability. However, for each subsequent fiscal year’s annual report, the registrant will be required to provide an attestation report for an additional fiscal year until an attestation report is provided for the entire period covered by the registrant’s GHG emissions disclosures.”
As further clarification, the SEC confirms that the final rules do not require an attestation report specifically covering the effectiveness of internal control over GHG emissions disclosure. In a change from the proposal, the final rules do not require the attestation report to be included in a separately captioned “Climate-Related Disclosure” section in the relevant filing, although it may elect to do so.
Additional Disclosure by the Registrant (Item 1506(d)) The proposed rules would have required disclosure of certain additional matters related to the emissions attestation that are typically not included in an attestation report, regarding licensing, oversight inspections and record-keeping. The final rules retained only one of those disclosure requirements but added another in response to comments.
Under the final rules, companies will be required to disclose whether the attestation provider is subject to any oversight inspection program, and if so, which program, and whether the emissions attestation engagement is included within the scope of authority of that oversight inspection program. With regard to the provider, the requirement “is not limited to oversight inspection programs that include within their scope, or require the inspection of, the GHG emissions attestation engagement.” “Any” oversight inspection program that applies to the provider might include, for example, oversight inspection programs for financial statement audits. On the question of whether the attestation engagement would be considered within the scope of an oversight inspection program, the SEC would consider the engagement to be within the scope “if it is possible that the assurance services could be inspected pursuant to the oversight program, even if it is not certain that the services will be inspected in a particular inspection cycle. An example of such an oversight inspection program is the AICPA’s peer review program, which includes within its scope attestation engagements performed by a certified public accountant in accordance with AICPA standards.”
The final rules also add a provision requiring AFs and LAFs subject to Item 1506(a) to disclose certain information when there is a change in, and disagreement with, the attestation provider, modeled after the requirements for disagreements with accountants in Item 4.01 of Form 8-K and Item 304 of Reg S-K; here, however, the disclosure will be in the filing with the emissions report, not in an 8-K.
In the event that the attestation provider resigns (or indicates that it declines to stand for re-appointment after completion of the attestation engagement) or is dismissed, companies will be required to state whether the former provider resigned, declined to stand for re-appointment, or was dismissed, along with the date.
In addition, the company will be required to state whether, during the performance of the attestation engagement, there were any disagreements with the former provider on any matter of measurement or disclosure of GHG emissions or attestation scope of procedures. If so, the company must describe each disagreement and state whether the company “has authorized the former GHG emissions attestation provider to respond fully to the inquiries of the successor GHG emissions attestation provider concerning the subject matter of each such disagreement.” This requirement applies only to AFs and LAFs that are required to obtain an attestation report pursuant to Item 1506(a); it does not apply to companies that voluntarily obtain assurance over their GHG emissions disclosure and provide the information about the engagement required under Item 1506(e) for voluntary assurance.
The rules include an expansive discussion of the meaning of the term “disagreements”: the term is to be
“interpreted broadly, to include any difference of opinion concerning any matter of measurement or disclosure of GHG emissions or attestation scope or procedures that (if not resolved to the satisfaction of the former GHG emissions attestation provider) would have caused it to make reference to the subject matter of the disagreement in connection with its report. It is not necessary for there to have been an argument to have had a disagreement, merely a difference of opinion. For purposes of this section, however, the term disagreements does not include initial differences of opinion based on incomplete facts or preliminary information that were later resolved to the former GHG emissions attestation provider’s satisfaction by, and providing the registrant and the GHG emissions attestation provider do not continue to have a difference of opinion upon, obtaining additional relevant facts or information. The disagreements required to be reported in response to this section include both those resolved to the former GHG emissions attestation provider’s satisfaction and those not resolved to the former provider’s satisfaction. Disagreements contemplated by this section are those that occur at the decision-making level, i.e., between personnel of the registrant responsible for presentation of its GHG emissions disclosure and personnel of the GHG emissions attestation provider responsible for rendering its report…. In determining whether any disagreement has occurred, an oral communication from the engagement partner or another person responsible for rendering the GHG emissions attestation provider’s opinion or conclusion (or their designee) will generally suffice as a statement of a disagreement at the ‘decision-making level’ within the GHG emissions attestation provider and require disclosure under this section.”
Disclosure of voluntary assurance (Item 1506(e)). If not required to include a GHG emissions attestation report, companies may still obtain assurance (even of voluntary Scope 3), or upgrade to reasonable assurance, on a voluntary basis, but must disclose certain information about the assurance engagement, including identification of the service provider, description of the assurance standard, the level and scope of assurance services provided and the results. Disclosure will also be required about “[w]hether the service provider has any material business relationships with or has provided any material professional services to the registrant,” and, as discussed above under “Additional Information,” “[w]hether the service provider is subject to any oversight inspection program, and if so, which program (or programs) and whether the assurance services over GHG emissions are included within the scope of authority of such oversight inspection program.” This disclosure is required even if the company decides not to disclose the results of the assurance: the “final rules require disclosure of this information whenever assurance services are voluntarily obtained by the registrant.”
Under the final rules, the disclosure is required only about voluntary “assurance,” that is, “services performed in accordance with professional standards that are designed to provide assurance, which would include, for example, an examination providing reasonable assurance or a review providing limited assurance,” but would not include “verification services” or other non-assurance services.
In instances of voluntary assurance, the SEC does not consider “the assurance provider as having prepared or certified the filing or any information contained therein. In addition, Item 1506(e) will not require registrants to file or furnish any voluntary assurance reports to the Commission.” Further, a description of assurance services under this rule “will not be considered a part of the registration statement prepared or certified by an expert or person whose profession gives authority to the statements made within the meaning of sections 7 and 11 of the Securities Act.” However, if the assurance report is voluntarily filed or furnished and the assurance is provided at a reasonable assurance level, or if the company “chooses to voluntarily disclose more information than is required under Item 1506(e) of Regulation S-K, then, by its terms, the exception in Rule 436 would not apply, and the assurance provider may be required to provide a consent in accordance with applicable statutory provisions and rules and would be subject to Section 11 liability.”
The nature of the disclosure depends on the timing of the voluntary assurance relative to the assurance compliance dates. The SEC states that, for “filings made after the compliance date for the GHG emissions disclosure requirements but before Item 1506(a) requires limited assurance, a registrant would only be required to provide the disclosure called for by Item 1506(e). For filings made after the compliance date for assurance required by Item 1506(a), to avoid potential confusion, the additional, voluntary assurance obtained by such filer would be required to follow the requirements of Items 1506(b) through (d), including using the same attestation standard as the required assurance over Scope 1 and/or Scope 2 emissions.” See the SEC’s table below.
| After the Compliance Date for GHG Emissions Disclosure but before the Compliance Date for Assurance | After the Compliance Date for Assurance | |
|---|---|---|
| LAFs and AFs subject to Items 1505 and 1506(a) through (d) (e.g., registrants that are required to disclose GHG emissions and obtain assurance) | Any voluntary assurance over any GHG emissions disclosure must comply with the disclosure requirements in Item 1506(e). | Any voluntary assurance obtained over GHG emissions disclosures that are not required to be assured pursuant to Item 1506(a) (e.g., voluntary Scope 3 disclosures) must follow the requirements of Item 1506(b) through (d), including using the same attestation standard as the registrant’s required assurance over Scope 1 and/or Scope 2 disclosure. |
| Registrants not subject to Items 1505 or 1506(a) through (d) (e.g., registrants that are not required to disclose GHG emissions) | Any voluntary assurance over any GHG emissions disclosure must comply with the disclosure requirements in Item 1506(e) | Any voluntary assurance over any GHG emissions disclosure must comply with the disclosure requirements in Item 1506(e). |
