Regulatory Pulse: SEC Climate Disclosure Checklist

The US Securities and Exchange Commission finalized its climate disclosure rule in 2025, putting Large Accelerated Filers on the hook for expanded climate risk reporting starting with FY25 annual reports. Smaller issuers phase in later, but every public company should start execution now to avoid scramble season in early 2026. This memo distills the requirements, timelines, and actions finance and sustainability leaders must coordinate.

Executive Summary

• Effective dates: Large Accelerated Filers (LAFs) must include climate disclosures in Form 10-Ks covering fiscal years ending on or after December 31, 2025. Accelerated Filers follow in FY26; Smaller Reporting Companies secure deferrals but still face investor pressure.
• Scope: Disclosures span governance, strategy, risk management, metrics, targets, and financial statement footnotes. Scope 1 and Scope 2 emissions reporting is mandatory for LAFs, with limited assurance beginning FY27. Scope 3 remains required only when material.
• Internal controls matter. The SEC expects climate data to sit within SOX-compliant processes. Ad hoc spreadsheets will not pass auditor review.
• Investor scrutiny is high. Proxy advisors and ESG funds already flag companies lacking credible climate transition plans.

Timeline and Applicability

California overlap: SB 253 and SB 261 kick in for 2026 reporting, so dual compliance planning is essential for multi-state operators.

Disclosure Requirements

Governance and Oversight

• Describe board oversight of climate-related risks and opportunities, including committees, expertise, and how frequently climate topics appear on agendas.
• Outline management roles, escalation paths, and metrics used to monitor progress.
• Document incentive structures that tie executive compensation to climate goals, if applicable.

Strategy and Risk Management

• Discuss material climate risks (acute, chronic, transition) over short, medium, and long term horizons.
• Explain scenario analysis approaches, including assumptions and financial modeling outputs.
• Detail how climate risks integrate into enterprise risk management and capital allocation decisions.

Metrics and Targets

• Report Scope 1 and Scope 2 emissions (gross and net if offsets used), intensity metrics, and methodology.
• Disclose targets, timelines, and interim milestones. Outline use of carbon credits or renewable energy certificates.
• Provide financial statement footnote impacts when severe weather or transition costs cross the 1 percent threshold of relevant line items.

Controls and Data Readiness

• Data architecture: Integrate emissions data into enterprise resource planning (ERP) or sustainability platforms with audit trails. Avoid manual spreadsheets.
• System owners: Assign responsibility to finance, operations, sustainability, and IT. Build a RACI matrix covering data capture, validation, and reporting.
• Internal controls: Map climate data processes to SOX control frameworks. Involve internal audit early to test control design.
• External assurance: Engage assurance providers now to align on methodologies, evidence expectations, and sampling strategies.

Action Plan (Next 6 Months)

1. Form a climate disclosure working group. Include CFO, general counsel, sustainability lead, investor relations, and operations.
2. Conduct a gap assessment. Compare current reporting with SEC requirements and California mandates. Prioritize areas lacking controls or documentation.
3. Select tooling. Choose or upgrade carbon accounting platforms (Persefoni, Watershed, Sphera) that integrate with ERP and produce audit-ready logs.
4. Develop a reporting calendar. Align climate data collection with financial close. Set deadlines for data owners two to three weeks before 10-K drafting begins.
5. Draft narrative templates. Prepare governance, strategy, and risk sections in collaboration with legal and investor relations to ensure consistent messaging.
6. Educate the board. Run workshops on new obligations, scenario analysis, and investor expectations.

Risk Watch

• Litigation exposure: Expect securities lawsuits if disclosures prove inaccurate or omit material risks. Document assumptions and maintain evidence.
• Greenwashing enforcement: The SEC and FTC continue to scrutinize marketing claims. Align marketing language with SEC filings to avoid contradictions.
• State-level overlap: California laws demand Scope 1, 2, and 3 reporting for companies above USD 1B revenue, regardless of SEC phase-in. Harmonize methodologies.
• Data gaps: Supply chain emissions remain challenging. Start supplier engagement programs now to reduce reliance on industry averages.

Sources and References

• SEC Climate Disclosure Fact Sheet
• PwC Governance Insights Center: Implementing the SEC Climate Rule
• California Air Resources Board: Climate Corporate Accountability Act