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Mandatory Climate Reporting: Implications for Private Equity


 How do the new climate regulations affect private companies? 

New and expected climate risk disclosure regulations from the EU, the US Securities & Exchange Commission (SEC), and the state of California create new requirements and value creation opportunities for private equity (PE) portfolio companies. Whether in the due diligence phase, as part of ongoing management, or as part of your exit/IPO strategy, understanding the climate compliance needs of portfolio companies is more important than ever. 

 How do the new climate regulations affect private companies? 

 A quick overview of relevant regulations: 

  European Union’s Corporate Sustainability Reporting Directive (CSRD)  California’s Climate Disclosure Laws  SEC’s Proposed Climate Disclosure Rule 
Scope of coverage  1) Companies listed on EU-regulated markets; 2) Large EU companies, both listed and unlisted, including large subsidiaries of non-EU companies; 3) SMEs listed in the EU; 4) Non-EU parent companies with more than €150 million in annual EU revenue.​ 


~50,000 EU companies and ~10,000 non-EU companies (1/3 of those U.S. co’s)​ 

Public & private companies (including LLCs and partnerships) organized in the United States and “doing business in California.”​ 


SB 261: >$500 million revenue (~10,000 companies)​ 

SB 253: >$1 billion revenue (~5,000 companies)​ 

SEC registrants (mostly companies with U.S. public equity listings, including foreign private issuers)​. 


~8,000 companies​ 

Information required  Broad range of sustainability topics including climate. Unique double materiality threshold​. 


Emissions reporting subject to (double) materiality determination​. 

SB 261: Biennial preparation and publication of a TCFD-aligned risk report.​ 


SB 253: Annual Scopes 1-3 emissions data.​ 


Emissions data required regardless of materiality determination​. 

Climate-related risks, primarily through the lens of traditional financial materiality​. 


Scope 1-2 emissions; Scope 3 if material or if the company has set a target. 

Status  Implementation ongoing; first round of companies will report on 2024 data​.  Signed by Governor Newsom; pending regulatory implementation​.  Pending finalization and adoption​. 


 To sum things up, what do these new regulations mean for private equity? 

 Get in touch:


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Mariel Barrera Fermin

Mariel Barrera Fermin has over 18 years- experience working within financial services and the investment management sector focusing on Impact & ESG. She is the Business Development Director for Impact Solutions at Adec Innovations. Providing Impact services for Corporates, asset managers and banks.


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