Last month, the SEC, by a 3-1 margin, approved new rules that would force publicly traded companies to disclose more information regarding how their business operations affect climate and carbon emissions. Specifically, they would need to report the effect of climate risks on their businesses, their own greenhouse gas emissions, and their climate-related goals.
SEC Chair Gary Gensler suggested these proposed rules would help protect companies’ investors by giving them as much information as possible regarding risk of future earnings before their trade, particularly if climate change could weigh on the company’s ability to generate cash. “I really do think that the SEC has a role to play here when this amount of investor demand and need is there,” said Gensler.
The rules enter a 60-day public comment period during which companies and their investors can remark on and suggest changes to the proposed rules. These rules will likely prompt unsupportive responses from investors and lawmakers who may see these required disclosures as an overstep of SEC powers as well as a way to jumpstart the Biden administration’s stalled environmental policy agenda. If the rules are approved and adopted, there will be a phase-in period for companies to disclose the climate information into their annual financial reports. Companies with over $700 million worth of public shares would be expected to file the climate-related data to the SEC beginning in fiscal year 2023.