Differences in Climate Risk Reporting This Year

If you’re a CFO and still think climate regulation is just a compliance headache, I’d encourage you to read SB 253 and SB 261 a bit more closely. These two bills won’t just require you to report climate data. They’ll expose how prepared (or not) your company is to handle climate risk — financially, reputationally, and operationally. That has implications for capital markets. Investor relations. Insurance premiums. And future access to public and private funding. Let me make it tangible: → SB 253 will force companies doing business in California to disclose full Scope 1, 2 and 3 emissions. That means mapping your upstream and downstream value chain. Not estimating. Not modeling. Disclosing. → SB 261 demands public disclosure of climate-related financial risks and how your company plans to manage them. Think TCFD-style reporting — but public and enforced. And yet, many companies are still thinking in terms of ESG checklists and one-off materiality assessments. That’s not going to cut it anymore. What’s coming isn’t “more compliance.” It’s a shift in how financial performance and sustainability are tied together. Regulators are accelerating that shift. If I were in your seat, I’d ask two simple questions: Do we have a clear line of sight from raw supply chain data to our financial disclosures? Can we actually prove what we’re reporting? If the answer is no — that’s not a reporting problem. It’s a business readiness problem. The good news? There’s still time to move. But in Q3 and Q4, as budget conversations start ramping up, the cost of not preparing will start to show up on the balance sheet. Because climate risk is now business risk. And this time, it’s not just your CSO’s responsibility to solve it.

Climate risk used to live in the shadows. Now it’s on the front page of regulated reports. This is the first installment of my new Substack series, Climate Change: Risks, Responses, and Remedies. Round 1: Climate Reporting – From Fine Print to Front Page For years, climate issues were tucked into sustainability reports or buried in an obscure risk factor. But finance hates uncertainty, and climate science is becoming impossible to ignore. The turning point came in 2015 with the creation of the Task Force on Climate-related Financial Disclosures (TCFD). The idea was simple. If climate change poses risks to companies, investors need to know about them. What began as voluntary reporting is now moving toward harmonized global standards: * The EU’s Corporate Sustainability Reporting Directive (CSRD) * California’s new disclosure laws (SB 253 and SB 261) * The ISSB’s climate standards, being adopted or considered in dozens of countries Why does this matter? Because disclosure is more than paperwork. When companies measure and report climate risks, they begin to understand and manage them more closely. That awareness is the foundation for resilience. And it democratizes information: whether you’re a pension fund trustee or an individual investor, you can see if a company is preparing for a hotter, stormier, more carbon-constrained world. #climatechange #climate #climaterisk

The Evolution of Climate Disclosure 🌎 This diagram, developed by BCG a few months ago, offers a helpful snapshot of how climate disclosure expectations have evolved across three key dimensions: reporting obligations, thematic scope, and strategic planning. First, we see a clear movement from voluntary guidance to mandatory reporting. While companies previously relied on general principles and optional frameworks, jurisdictions are increasingly introducing formal regulations that require standardized and verifiable disclosures. Second, the scope of reporting is expanding — from a narrow focus on climate change to a broader view that includes sustainability and nature-related impacts. This shift reflects a growing understanding that climate cannot be addressed in isolation from ecosystems and social systems. Third, the emphasis is moving beyond risk identification to transition planning. Regulators and stakeholders are now asking organizations to define how they intend to deliver on their climate commitments — not just why targets matter, but how they will be met over time. An additional layer is the growing adoption of double materiality. Disclosures are expected to reflect both the financial risks posed by climate change and the organization’s own impacts on environmental and social systems. Taken together, these shifts signal a new era of climate reporting: one that is more forward-looking, integrated, and aligned with broader sustainability goals. Companies must now prepare to disclose not just data, but a clear pathway toward transformation. Some elements of the diagram may need updates to reflect the latest developments and frameworks as we approach 2025. Still, it remains a valuable reference for understanding the direction of travel in climate disclosure and corporate accountability. #sustainability #sustainable #business #esg #climatechange #reporting

Raising the bar on climate risk! The Bank of England's Prudential Regulation Authority (PRA) has issued new expectations for banks and insurers. Our team reviewed the changes by comparing the original SS3/19 with the newly released Consultation Paper SS10/25, which remains open for comment. We analyze where expectations have evolved the most. 𝗛𝗲𝗿𝗲 𝗮𝗿𝗲 𝗳𝗶𝘃𝗲 𝗼𝗳 𝘁𝗵𝗲 𝗯𝗶𝗴 𝘀𝗵𝗶𝗳𝘁𝘀: -Boards must now formally review and document material climate risks, with #risk appetite cascaded across the business. -Scenario analysis must be tailored, regularly updated, and used in decision-making, including #stresstesting. -Banks are required to factor #climaterisk into liquidity planning as part of their ILAAP processes. -Insurers must embed #climate risks into their ORSA and SCR calculations -Proportionality is clarified. It is based on risk exposure, not firm size. All firms must assess #financial materiality. 👍Below is our side-by-side table comparing SS3/19 and CP10/25 for you to share with your teams! For subscribers, we’ve gone deeper, looking at what this means for ICAAPs, Boards, data strategy, and regulatory engagement. 💡 You can find the full analysis in our newsletter!

#𝗘𝗦𝗚𝗶𝗻𝗧𝗵𝗿𝗲𝗲: 𝗜𝘁’𝘀 𝗴𝗼 𝘁𝗶𝗺𝗲!  𝙃𝙤𝙩 𝙤𝙛𝙛 𝙩𝙝𝙚 𝙥𝙧𝙚𝙨𝙨! Deloitte’s comprehensive Heads Up https://lnkd.in/ewk2x8_d provides a deep dive analysis of the final SEC Climate Disclosure Rule. Check out this practical tool that helps unpack the requirements and nuances of the final rule, including practical examples. A few areas of further emphasis to highlight connectedness considerations across multiple areas of the final rule: 𝟭. 𝗦𝘁𝗿𝗮𝘁𝗲𝗴𝘆: More than 90% of the S&P 500 disclosed matters related to climate change or GHG emissions in the risk factors section of their most recent annual report. However, much more specific disclosure will be required under the final rule, including specific disclosures by type of climate risk (physical and transition). For material climate-related risks, required disclosures about the impact (actual or potential) of the risk to “strategy, business model, and outlook” include specific information on how they affect strategy, targets/goals, resources, etc. For LAFs, #DCPs related to these disclosures will need to be in place and tested by 1/1/25.  𝟮. 𝗖𝗹𝗶𝗺𝗮𝘁𝗲 𝗥𝗶𝘀𝗸 𝗠𝗮𝗻𝗮𝗴𝗲𝗺𝗲𝗻𝘁: A registrant is required to disclose its 𝗽𝗿𝗼𝗰𝗲𝘀𝘀𝗲𝘀 for “identifying, assessing and managing” material climate-related risks, including evaluating whether the risk has been incurred/likely to be incurred, response to the risk including whether it will address the material risk and whether the process is integrated into #ERM. Orgs should consider existing processes in place for purposes of #TCFD or #CDP disclosures, which are both designed to meet info needs of investors. Again, for LAFs, #DCPs related to these disclosures (including the process by which the materiality determination was made) will need to be in place and tested by 1/1/25. 𝟯. 𝗧𝗮𝗿𝗴𝗲𝘁𝘀 𝗮𝗻𝗱 𝗚𝗼𝗮𝗹𝘀: A registrant must disclose info on their publicly announced or 𝙞𝙣𝙩𝙚𝙧𝙣𝙖𝙡 climate-related targets or goals, if material. Required disclosures then include; scope of activities (e.g., Scopes 1,2,3 GHG emissions), how measured, time horizon, baseline, update on progress, etc. This is where disclosure of GHG emissions could be required well ahead of phase-in implementation dates for Scopes 1 & 2 GHG emissions, for example. Again, for LAFs, this means #DCPs related to these disclosures (potentially including Scopes 1,2,3 GHG emissions) will need to be in place and tested by 1/1/25. Additionally, the final rule requires disclosures about any voluntary assurance obtained (before required) if the GHG emissions disclosures are included in the SEC filing. The time to accelerate preparedness is now, #assurancereadiness can be an important tool. Please note the implementation considerations included in the Heads Up! #deloitteesgnow

The SEC (Securities and Exchange Commission) came out with their final Climate Disclosure Ruling. I'd like to provide some crib notes on the key aspects which could use some explanation if you don't follow this closely. ✅ And at the end of my post, learn why the outcome reminds me of climate conferences I've attended in Florida. 🔥 The hottest component of contention was whether scope 3 emissions would be included. When the SEC first released their proposed rules in March two years ago, it included reporting on all scopes (1, 2 and 3). This turned out to be a bold step They received thousands and thousands of comments...24,000 and lots of threats of litigation. ➡️ Why does Scope 3 matter so much? In our current economy many businesses have evolved to a point where they don't own and directly operate their operations. This means you have situations where a company only owns and operates the offices where the staff work who develop and maintain the brand, manage relationships with their supply chain and perhaps design products. Their supply chain consists of all the production and movement of their products with contract manufacturers, contract farmers, transportation firms and others. In this example the electricity, heat, refrigeration used in the office(s) are the scope 1 & 2 emissions. I have worked with very large companies for which this only makes up 10%-15% of their overall emissions. Supply chain emissions fall under Scope 3, and it this example that would be the majority of their emissions. 🔥 The final rules which came out yesterday do not include Scope 3 and include "material" (as defined by each company) Scope 1 & 2 ➡️ What was kept in place was reporting around climate risk. With extreme weather events causing $92.9 billion in damages in 2023 this is very obviously material and seems to be a less contentious point. ✅ The outcome reminds me a lot of the climate conferences I've attended in Florida. The content is all about Resiliency (treating the symptoms of climate change with things like sea walls) and it's unspoken but understood that no one should talk or present on Mitigation (this would be the actions taken to stop creating the problems and focus on reducing emissions and biodiversity loss) https://lnkd.in/etJ5TruE #sec #climatedisclosure #climatedisclosures #scope3emissions #scope3 #climaterisk #climaterisks #climatechange Holly serves as a Fractional Executive and Board Advisor.  Opinions expressed are solely my own and do not express the views or opinions of my clients.

Yesterday, the U.S. Securities and Exchange Commission (SEC) published its Final Rule, “The Enhancement and Standardization of Climate-Related Disclosures.” We welcome the Final Rule's provision of a framework for climate-related financial disclosures closely tied to financial statements. This information, encompassing governance, strategy, risk management, targets, and GHG emission data, empowers investors to allocate capital effectively, safeguarding against the build up of climate-related systemic financial risks and promoting transparency and comparability in global markets. It is encouraging to see the U.S. join peer regulators around the world, making climate-related financial disclosures mandatory to support greater transparency and accountability across markets and jurisdictions. WBCSD – World Business Council for Sustainable Development supports the global harmonization of climate-related financial disclosures to drive transparency, accountability, and performance in markets worldwide. A globally consistent approach to climate-related financial disclosures is needed to provide investors with consistent, comparable, and decision-useful risk disclosures. This will also reduce companies' compliance costs and complexity. We commend the SEC for adopting this ruling, which will contribute to a global baseline of climate risk disclosure, help maintain U.S. leadership, and keep U.S. companies competitive in global markets.  However, since a company’s supply chain can account for as much as 90% of its indirect greenhouse gas emissions, we are disappointed that Scope 3 emissions disclosure is not in the final rule. We also regret that the ruling does not require companies to use internationally comparable climate scenario frameworks to inform their management of climate risk. We look forward to future developments of the SEC’s rulings on climate-related disclosures to support greater alignment with California’s climate disclosure laws, and with global frameworks such as the International Sustainability Standards Board (ISSB) S2 Standard for Climate-Related Financial Disclosures, the European Union Corporate Sustainability Reporting Directive (CSRD) reporting framework set out in the European Sustainability Reporting Standards (ESRS), and the disclosures aligned with the widely-accepted Taskforce on Climate-Related Financial Disclosures (TCFD). 

📣New Guidance on California - What You Need to File by January 1 Last week, CARB released its official reporting checklist for SB 261, giving companies explicit direction on what’s required for year 1 of climate risk disclosures. Here’s the high-level breakdown: ✅ Choose your framework (TCFD, IFRS S2, or similar government-regulated standard) ✅ Provide a clear statement on what’s included in your disclosure, and what’s not (and why) ✅ Cover the four core areas: governance, strategy, risk management, and metrics & targets (the minimum expectations are now outlined in the reporting checklist)  ✅ Publish on your public site and submit to the CARB portal by January 1, 2026 If your company has annual revenue >$500M and does business in California, this checklist is your playbook to ensure you’re compliance ready in the next 3 months. Climate risk disclosures don’t have to be all or nothing. I’d love to chat with you about your approach if you need a thought partner. Just message me!