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Explanation of SEC Scope 3 reporting in proposal

Scope 3 emissions are associated with a company’s value chain, such as emissions from purchased goods (upstream) and from use and disposal of its products (downstream) – and requiring disclosure is a bold move by the SEC.  See below for explanation of proposed rule and expected next steps.  On a related note, there is a new Climate Risk Unit (CRU) formed at the CFTC.  The CFTC together with other regulators are looking at providing guidance on risks to financial system relating to climate.   Currently, there are only very limited instances when CFTC-regulated market participants need to provide any disclosures, but this is likely to change.

On March 21, 2022, the U.S. Securities Exchange Commission (“SEC”) approved and released a proposed rulemaking package (the “Proposed Rule”) that would enact sweeping changes to climate-related disclosures. One key component of the Proposed Rule is a reporting requirement for certain Scope 3 emissions.