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SEC Office Expands ESG Commitment: Public Hearing on Carbon Emission Expense Deductions

In a proactive move towards fostering sustainability and Environmental, Social, and Governance (ESG) principles, the Office of Securities and Exchange Commission (SEC) has initiated a public hearing on a significant draft proposal. This development underscores the SEC Office’s dedication to ESG initiatives, aligning with its previous commitment showcased in the SEC Office Sor Mor. 18/2564 notification.

The Draft Proposal

The draft, titled “SEC Office’s Notification Regarding Measures in Filing of the Annual Registration Statements and Registration Statement for Securities Offering for the Companies Disclosing a Carbon Emission Information”, was open for public discussion from October 20, 2023, to November 18, 2023.

The SEC Office had earlier supported companies disclosing carbon emission information by allowing them to deduct expenses related to Carbon Footprint Assessment Registered Verifiers (Verifiers) from filing fees. This measure, as outlined in the previous notification, was scheduled to conclude by the end of 2023.

The proposed draft extends the allowed deduction period until 2026 for Filing submissions and, for the years 2023 to 2025, for the submission of Annual Registration Statements (Form 56-1). Notably, the Draft introduces some crucial amendments to enhance the effectiveness of the initiative.

 Key Amendments

  •  Inclusion of Registered Consultant Fees: In addition to Verifier fees, the Draft allows companies to claim expenses paid to registered consultants for the preparation of carbon footprints.

  •  Inter-Company Fee Deduction: Companies operating as holding entities can now claim fee deductions from the expenses of their operating subsidiaries engaged in the business of disclosing carbon emission information.

  •  Timeframe for Deduction Claims: Companies are granted a specific timeframe for claiming deductions. This includes the date of filing Form 56-1, unless a justified and appropriate reason is provided, and from the date of the application for a public offering of newly issued shares to the effective date of the Filing.

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    Implications and Future Prospects

    The proposed amendments not only signify the SEC Office’s ongoing commitment to ESG but also highlight the importance of incentivizing companies to disclose their carbon footprint information responsibly. This initiative aligns with global efforts to mitigate climate change and encourages sustainable business practices.

    As the public hearing period unfolds, stakeholders are encouraged to participate and contribute to the discussion on this pivotal draft. The SEC Office’s proactive stance in facilitating ESG practices sets a positive precedent for the financial sector, reinforcing the notion that responsible corporate behavior is an integral component of long-term success.

    Disclaimer: This article is based on information available as of December 2023, and readers are advised to refer to official SEC communications for the latest updates.

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