We previously reported on requirements for Scope 3 emissions in the proposed climate disclosure rule released by the U.S. Securities Exchange Commission (“SEC”) on March 21, 2022 (“Proposed Rule”). In addition to Scope 3 emissions, the Proposed Rule would also require a registrant to disclose information about its direct GHG emissions (Scope 1) and indirect emissions from purchased electricity or energy sources (Scope 2). This post focuses on attestation requirements in the Proposed Rule for those Scope 1 and Scope 2 disclosures.

Who is subject to Scope 1 and Scope 2 attestation requirements and when is compliance required?

Section 229.1505 of the Proposed Rule would require a company that is an accelerated filer or large accelerated filer[1] to include an attestation report in its Scope 1 and 2 disclosures. The attestation requirement also applies to foreign private issuers.

The Proposed Rule does not make compliance with Scope 1 and 2 disclosure and attestation requirements immediate. Instead, subject companies are provided a grace period to achieve compliance with Scope 1 and 2 disclosure requirements. The Proposed Rule would also provide a transition period for the assurances required for the Scope 1 and 2 disclosure attestations (see further discussion below). The proposed compliance timeframes are as follows:

Filer Type   Scopes 1 and 2 GHG Disclosure Compliance Date Limited Assurance Reasonable Assurance
Accelerated Filer Fiscal year 2024 (filed in 2025) Fiscal year 2025 (filed in 2026) Fiscal year 2027 (filed in 2028)
Large Accelerated Filer Fiscal year 2023 (filed in 2024) Fiscal year 2024 (filed in 2025) Fiscal year 2026 (filed in 2027)

Who prepares the attestation report?

Under the Proposed Rule, a GHG emissions attestation provider would be required to prepare and sign the attestation report. The attestation provider would not need to be a registered public accounting firm. However, the Proposed Rule includes characteristics of acceptable attestation providers including:

  1. Expertise in GHG emission based on significant experience in measuring, analyzing, reporting, or attesting to GHG emissions.
  2. Independence from the reporting company and any of its affiliates.

According to the agency, the proposed expertise requirement is intended to ensure that the attestation provider is sufficiently competent to perform the attestation engagement. With respect to independence, SEC states that emissions disclosures by independent attestation providers should improve the reliability of the disclosure.

What are the attestation report requirements?

The Proposed Rule would require an attestation report to be prepared in accordance with attestation standards. SEC references the PCAOB, AICPA, and IAASB as attestation standards suitable for ensuring that the disclosure process is performed under an acceptable attestation framework. Notably, the Proposed Rule would require the attestation standard used to be publicly available and established according to due process procedures. The agency has requested comments on what standards currently used in voluntary climate-related assurances markets would be suitable for emissions under the Proposed Rule.

The attestation report would also be required to include a statement that identifies the level of assurance provided. Companies would be afforded a transition period under the Proposed Rule to meet the attestation requirements. Limited assurance requirements would begin fiscal year 2024 for large accelerated filers and fiscal year 2025 for accelerated filers. Reasonable assurance requirements would begin 2026 for large accelerated filers and fiscal year 2027 for accelerated filers. The Proposed Rule includes a footnote explaining that reasonable assurance is equivalent to the level of assurance provided in an audit of a registrant’s consolidated financial statements included in a Form 10-K. Limited assurance is equivalent to the level of assurance (commonly referred to as a “review”) provided over a registrant’s interim financial statements included in a Form 10-Q.

In addition to the attestation standards and assurances requirements, the attestation report would be required to include information on the emissions and criteria used to evaluate the emissions, statements regarding the attestation provider’s independence, and the attestation provider’s opinions and conclusions as well as certain administrative information.

What additional Scope 1 and 2 disclosure requirements are proposed for large accelerated filers and accelerated filers?

In addition to the GHG emissions attestation requirements contained in 229.1505(a), large accelerated and accelerated filers would be required to provide certain information regarding the attestation provider.  The following information would be required within the filer’s “Climate-Related Disclosure” section:

  1. Identification of the attestation provider’s licensing or accreditation, if any;
  2. Identification of the oversight inspection program(s), if any, to which the emissions attestation engagement is subject; and
  3. Information regarding any record-keeping requirements applicable to the attestation provider’s engagement.

The agency notes that this information is not typically included in an attestation report.  However, it believes these proposed requirements would allow investors additional transparency regarding the attestation provider and its business practices.  The agency has sought comment whether each piece of information should be required.

What are non-accelerated filers required to disclose on GHG emissions?

Companies that are exempt from the GHG emissions attestation requirement under 229.1505(a), but subject to third-party attestation or verification, are required to file a “Climate-Related Disclosure” that must include the following GHG emissions information:

  1. Third-party provider of attestation or verification;
  2. Standard used;
  3. Level and Scope of attestation or verification;
  4. Results of attestation or verification;
  5. Other business relationships with provider that may impair service provider’s independence; and
  6. Oversight inspection program (e.g., AICPA peer review) applicable to service provider.

The agency suggests this provision is intended to balance transparency with anticipated industry resource constraints, stating that these disclosure items “should help investors. . .assess whether the voluntary assurance or verification has enhanced the reliability of the GHG emissions disclosure,” and also “mitigate the compliance burden of the proposed GHG emissions disclosure rules, taking into consideration the proportionate compliance costs that may impact accelerated and large accelerated filers [required to file a GHG emissions attestation] versus other types of filers.”

With respect to the issue of “impairment” of a third party provider’s independence, the SEC is requesting comment on whether it should simply require that the third-party be independent according to the standard under 1505(b), or some other standard, or alternatively whether the agency should develop new guidance on what constitutes impairment.


[1] Terms defined in 17 CFR § 240.12b-2.