As President Biden’s 2021 attempts to address climate change through congressional legislation all but failed, he has turned to the regulatory agencies – the SEC in this case – to help tackle this important agenda item. Our government relations expert Susan Olson speaks with an industry insider to unpack the complexities of the SEC’s proposed regulations on climate change regulations for public companies and issuers.

Susan’s guest is Melissa MacGregor, Managing Director and Associate General Counsel for trade association SIFMA (Securities Industry and Financial Markets Association). SIFMA plays a vital role through advocacy on legislation, regulation and business policy affecting retail and institutional investors. Highlights of the podcast summarized here.

Sec Releases Proposed Rule in March 2022 – What Is It?
The ruling would require public companies and private issuers to include climate-related disclosures in their registration statements and annual reports. Disclosures would provide investors with important decision-making information about the purchase or sale of securities. Also proposed are proscriptive oversight and governance requirements for company boards and management including how companies set climate-related targets and placing climate experts on boards of directors.

Greenhouse Gas Emissions (Ghg) Protocol – Scopes 1, 2, and 3
Among the required reporting is for GHG emissions, broken down by Scopes 1, 2, and (the more challenging) 3 emissions. Companies must report on emissions directly related to their own business and assets (Scope 1), or those generated by the purchased or acquired electricity, stem, heat, or cooling that is consumed by operations they own or control (Scope 2). Scope 3 emissions emanate from activities from assets that are not owned or controlled by the organization, but that impact its value chain. A fair amount of estimation is required to calculate Scope 3 emissions, resulting in some criticism of the proposal.

Industry Support and Criticism
While industry associations like SIFMA do support reasonable climate disclosures, criticism for the proposed ruling abounds, including what some call an entirely too short timeline for implementation. If the ruling is finalized by year-end 2022, firms would be required to start reporting in fiscal year 2023. Another criticism is around Regulation S-X, which lays out form and content of public company financial reporting, and going forward, could require disclosure for present climate risk as well as on a forward-looking basis.

Timeline From Proposal to Final Ruling
Timing can vary from proposal to proposal depending upon complexity and other factors, as Melissa describes. While the final timing is unknown, she takes us through the steps - from Acting SEC Chair Allison Lee’s initial request for proposal in March 2021 to the SEC’s release of the proposed ruling in March 2022, through the comment period, to the SEC’s updated final draft, review, and vote.

More Climate-Related Rulemaking to Come?
This may be just the start of climate-related rulemaking as we may see amendments to the names rule regarding marketing and how funds are named, as well as rules resulting from the much-discussed issue of greenwashing. There could also be upcoming regulation on asset managers and investment advisors.
Stay tuned.


The views and opinions contained herein reflect the subjective judgments and assumptions of the authors only and do not necessarily reflect the views of Natixis Investment Managers, or any of its affiliates.

This material is provided for informational purposes only and should not be construed as investment advice. The views and opinions are as of April 21, 2022, and may change based on market and other conditions. There can be no assurance that developments will transpire as forecasted, and actual results may vary.

Natixis Distribution, LLC is a limited purpose broker-dealer and the distributor of various registered investment companies for which advisory services are provided by affiliates of Natixis Investment Managers.