SEC Proposes Climate Disclosure Rules, Excludes ABS

On March 21, 2022, the Securities and Exchange Commission (SEC) proposed new rules that would require public companies to disclose mandatory climate risk-related information in annual financial reports and registration statements. The proposed disclosures are similar to certain global climate disclosure frameworks, such as the Taskforce for Climate Financial Disclosures and the Greenhouse Gas Protocol.

This proposal follows the March 2021 SEC request for public input on climate change disclosures, to which SFA responded with recommendations for a:

• principle-based disclosure regime – not mandated disclosure fields.

• phased-in approach to rulemaking – with any structured finance disclosure requirements being consider no earlier than 18 – 24 months given it is premature to scope in securitization issuers given the nascent nature of climate-related securitization issuances – and allow SFA and the securitization industry to develop market consensus disclosure frameworks for ABS (see SFA’s ESG Disclosure Initiative Disclosure Initiative).

In line with SFA’s recommendation this proposal does not apply to asset-backed securities; the SEC stated it is continuing to evaluate climate-related disclosures with respect to asset-backed securities. In the proposal, the Commission raised the following questions relevant to ABS:

• Should the SEC require asset-backed issuers to provide some or all of the disclosures under proposed Subpart 1500 of Regulation S-K? If so, which of the proposed disclosures should apply to asset-backed issuers?
• Are other types of climate disclosure better suited to asset-backed issuers?
• How can climate disclosure best be tailored to various asset classes?

Join our SFA ESG Task Force to collaborate with other market participants on our response to the SEC proposed rule.   Please email Jeff Gudiel, jeff.gudiel@structuredfinance.org, with any questions.