News and Insights

Sustainability and technology: the impact of the SEC climate disclosure ruling

June 13, 2024

Recently, the U.S. Securities and Exchange Commission (SEC) made a significant move by announcing new climate disclosure requirements for publicly traded companies. This ruling marked a key moment in corporate transparency and accountability regarding climate-related risks and opportunities. However, shortly after the ruling was announced, the SEC issued a suspension in the implementation of the climate disclosure rule as a result of ongoing legal disputes concerning the rule’s legitimacy.

With climate change posing a threat to our planet and global economy, businesses and investors alike are noticing and starting to take action. Recognising the urgency of addressing climate-related risks, the SEC has introduced new regulations to enhance the disclosure of information by public companies.

The significance of SEC climate disclosure

The importance of the SEC climate disclosure ruling lies in its ability to increase transparency and accountability around climate-related risks and opportunities among public companies. Its goal is to ensure that investors have access to a steady flow of reliable information to make informed decisions.

Although the SEC maintains its confidence in the legality of the rule, this has created concerns about its potential impact on businesses as well as the need for further stakeholder discussions.

Of course, the path of regulation does not always run smoothly. Reviews and tweaks are certainly  not uncommon, they do occur and can cause confusion for businesses and investors.

Implications for businesses and investors

The SEC climate disclosure ruling has potential implications for both businesses and investors. For businesses, it highlights the importance of robust climate risk management and transparent reporting practices. Companies will need to assess their climate-related risks and develop strategies to mitigate them effectively. Failing to do so could wear away investors’ trust.

For investors, the SEC ruling provides for greater insight into the climate-related risks and opportunities associated with their investment portfolios. By incorporating these disclosures into their investment decision-making processes, investors can better assess the long-term sustainability and resilience of companies.

The role of technology

Technology can help businesses stay on top of their sustainability reporting in many ways. If we take a look at data management for example, technology allows companies to collect, analyse and manage their sustainability data, allowing leaders to track progress, identify trends, and make data-driven decisions.

Also, technology can be used to report and monitor sustainability progress. Leaders can use environmental, social, and governance (ESG) reporting platforms to observe the environmental impacts in real-time, automate reporting processes, and ensure transparency and accountability in sustainability initiatives.

Looking ahead

Sustainability leaders must keep on top of changes in regulations to ensure they comply, mitigate risks and take advantage of opportunities that align with their sustainability goals and strategies. ESG reporting must call on multiple data sources; technology reporting platforms can help by streamlining data collection and disclosure. With the ongoing changes in regulations, like the SEC climate ruling, going forward it will become increasingly important for businesses to keep up to date with the latest changes to strengthen their sustainability reporting capabilities.

TAGS: Technology

POSTED BY: Aman Bhambra

Aman Bhambra