Public companies would be required to disclose how climate-related risks will impact their businesses, how they plan to identify and manage climate risks and more, according to a new proposed rule.
The Securities and Exchange Commission voted Monday to propose a new rule requiring public companies to report risks related to climate change and their own greenhouse gas emissions, in a move that puts the agency at the center of a debate over whether financial regulators have a role to play in protecting the U.S. economy from the effects of a warming planet.
“Today, investors representing literally tens of trillions of dollars support climate-related disclosures because they recognize that climate risks can pose significant financial risks to companies and investors need reliable information about climate risks to make informed investment decisions,” SEC Chairman Gary Gensler said prior to the vote.
The most controversial aspect of the rule proposal relates to Scope 3 emissions, or greenhouse gases released by a company’s customers in their use of a company’s product and by a company’s suppliers in the process of creating inputs. If the SEC votes to propose the rule, the public will have at least 60 days to submit comments critiquing the proposal. The comment period will end either 60 days from Monday, or 30 days after the proposal is published in the Federal Register, whichever period is longer. The SEC will then amend the rule based on public input and hold a separate vote to put the rule into effect. Depending on a company’s size, the rules could take effect as soon as 2024.
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