The Securities and Exchange Commission approved a final rule requiring climate-related investor disclosures with some ICBA-advocated relief for publicly held community banks, though ICBA said it remains concerned with the rule.

SEC Rule: The agency voted 3-2 to finalize an updated rule requiring registrants to include certain climate-related disclosures in their registration statements and periodic reports. The rule requires disclosures on material climate-related risks, activities to mitigate or adapt to such risks, board oversight, and greenhouse gas emissions that reporting companies produce (Scope 1) or indirectly cause by their activities (Scope 2).

Key Changes: The SEC’s final rule included numerous changes from its 2022 proposal, including ICBA-advocated relief for smaller reporting companies and emerging growth companies, though it failed to acknowledge that many community banks are large accelerated filers or accelerated filers. It also dropped Scope 3 requirements that would have mandated reporting on emissions from activities that organizations indirectly affect in their value chains.

Internal Dissent: Nevertheless, SEC Commissioners Mark Uyeda and Hester Peirce voted against the rule, arguing that it improperly uses federal securities laws to implement climate goals and fails to justify why climate issues deserve special treatment and disproportionate space in commission disclosures.

ICBA Opposition: In a national news release, ICBA criticized the rule’s unprecedented costs and potential liabilities but expressed appreciation for the SEC’s efforts to provide some ICBA-advocated relief in the final rule—which cites ICBA’s comments on its community bank compliance burden. In its 2022 comment letter, ICBA said the rule would drive many SEC-registered community banks away from the public capital markets.

What’s Next: The rule is scheduled to take effect 60 days from publication in the Federal Register, with phased-in compliance requirements set to start in 2025, though congressional and legal challenges are expected.