Climate risk disclosure regulations have been developing and expanding for some time and 2025 is going to be a key year. Some reporting requirements start now, some in 2026, as Moody’s noted this month.
But global investors want to know everything is covered no matter where they put their money, and all things climate eventually affect commercial real estate.
First up, the EU’s Corporate Sustainability Reporting Directive (CSRD). That will affect up to 50,000 entities not covered by the EU’s Non-Financial Reporting Directive, according to Grant Thornton Advisors. U.S. entities that have EU revenue or operations may find themselves with reporting obligations. CSRD established ESG (environmental, societal, governance) reporting within the management report. Whether a company comes under the requirements depends on the year of implementation (it started in 2024), the nature of the EU entity, and its size.
California’s disclosure mandate begins next year for many CRE companies. Companies with at least $1 billion in revenue have to disclose Scope 1, 2, and 3 emissions, according to a past Moody’s post. The California Air Resources Board has adopted regulations for disclosure of all scopes of emissions by January 1, 2025. The first actual disclosures of the first two are due in 2026, based on 2025 data. The first disclosures of Scope 3 are due in 2027. Third-party assurance of the data is required.
Under the Climate-Related Financial Risk Act, companies with revenues of $500 million or higher, with operations in California, and which aren’t regulated by the state’s Department of Insurance, start reporting by January 2026 on exposure to both physical and transition risks. After that, they report every two years.
The Securities and Exchange Commission passed its final disclosure rules in 2024, according to the Columbia Climate School’s Sabin Center for Climate Change Law. There are accelerated filing requirements for companies with a publicly traded equity value of $75 million or more. Filings cover Scope 1 and 2 emissions. However, with the Trump administration now in power and Gary Gensler out of the SEC, there is no way to know if the rule will be left in place as is, changed, or entirely overturned.
The International Financial Reporting Standards (IFRS) Foundation examined disclosures from 3,814 public companies and the recommendations from the Task Force on Climate-related Financial Disclosure (TCFD). All sectors showed an increase in TCFD-type disclosures in 2023. The buildings and materials category had the third-largest average number of recommended disclosures per company. Only insurance and energy were higher.