SEC Plans Proposed Climate Change Disclosure Rule

The U.S. Securities and Exchange Commission is planning to release a proposed rule by year’s end mandating that public companies disclose climate change-related risks.

SEC chair Gary Gensler told a webinar July 28 that investors want more information on climate change, adding that prior voluntary agency guidelines resulted in inconsistent disclosures.

“Investors are looking for consistent, comparable, and decision-useful disclosures so they can put their money in companies that fit their needs,” he said.

“Companies and investors alike would benefit from clear rules of the road.”

The SEC solicited public comment in March on climate change disclosures, attracting more than 550 responses. The agency said the majority of those responses “support mandatory disclosure rules.”

Financial Filings

Gensler said he directed agency staff to consider whether disclosures must be included in companies’ annual 10-K financial filings, include Scope 1, Scope 2 and/or Scope 3 emissions, and required specific metrics for different industries.

He said disclosure should be “decision useful,” including, for instance, how a company’s leadership manages climate change risk, greenhouse gas emissions metrics, financial impact, and progress toward climate-related goals.

Many of the comments submitted to the SEC show broad objection to disclosure if the rules do not include safe harbor provisions shielding companies from some penalties and investor lawsuits.

Both the U.S. Chamber of Commerce and the National Association of Manufacturers called for safe harbor provisions, with the chamber noting that “companies may choose not to set more ambitious climate commitments if legal liability continues to expand.”

“Many manufacturers already voluntarily disclose a significant amount of information about their climate efforts, but an over-broad mandate could impose new cost burdens on companies without providing useful information to shareholders,” NAM noted on its website.