At its meeting on September 21, the SEC’s Investor Advisory Committee expressed its broad support for all key proposed provisions of the SEC’s proposed climate and cybersecurity rules other than the board expertise disclosure requirement, and recommended these additional disclosures:
Climate
- Rule should require an “Management Discussion of Climate-Related Risks and Opportunities” in the Form 10-K, similar to the requirement for financial results and operations
- Rule should require disclosure of the locations of all material facilities, e.g., geographical concentrations that pose material risks of loss
The IAC supported the proposed Scope 3 emissions disclosure subject to inclusion of a safe harbor provision.
Cyber
- Rule should require companies to disclose the key factors they use to determine the materiality of a cybersecurity incident in a Form 10-K or other periodic filing, as well as in a Form 8-K disclosure following a reportable cybersecurity incident under the proposed rule
- Rule should extend certain provisions of proposed Item 106 re: cybersecurity risk management and strategy to registration statements to the extent practicable
The IAC also recommended that the rule require companies that have not developed any cybersecurity policies or procedures to affirmatively make a statement to that effect.
The IAC’s bases for encouraging the SEC to eliminate or reconsider the proposed board expertise requirements in both proposals were generally consistent with the concerns raised by the Society and other commenters (see, e.g., “Climate Disclosure Comment Letters: Key Themes” and the Society’s supplemental comment letter on the climate proposal, notes 5 and 7).
As previously reported, additional agenda items included human capital management, Schedules 13D/13G, and accounting modernization. See this Cooley post for a summary of the human capital and Schedules 13D/13G panel discussions.
See also the IAC’s draft accounting modernization recommendation; these articles: “SEC Advisory Panel Recommends Oversight of U.S. Accounting Rule Maker” (WSJ), “SEC committee supports, offers recommendations on climate, cyber rules” (Pensions & Investments); “The wrinkles with the SEC’s third-party assurance for emissions” (ESG Clarity), and “SEC advisory committee recommends revamp of FASB” (Accounting Today); and this post: “SEC Chair Gensler faces Senate Committee—will the SEC moderate Scope 3 disclosure requirements?” (Cooley).