Mar 28, 2022 | Posted by MadalineDunn
As the climate crisis reaches a tipping point, the US Securities and Exchange Commission (SEC) has proposed a new set of rules, which will require US companies with $25 million in assets to register with the SEC and include climate risks in their statutory reports. Part of this would see said companies provide information around their Scope 1 and Scope 2 GHGs and potentially Scope 3, too.
For greater transparency around sustainability efforts, the SEC is seeking to get these companies to make carbon-related statements, including carbon counting, alongside their audited financial statements. Likewise, the proposal includes climate-related goals and progress, climate transition plans, climate-related risk assessment information, and climate governance information.
Currently, there is a lack of clarity and consistency when it comes to climate-related reporting, which is part of what established the recently issued Carbon call (as reported by Baxtel last month) but much more needs to be done. Moreover, a lack of information symmetry, has been said to make matters difficult for investors.
Danielle Fugere, president and chief counsel of shareholder advocacy group As You Sow called the new proposal a "watershed moment" in responding to investor demand for accurate climate disclosure. She explained: "Clear and standardized reporting of greenhouse gas emissions is the bedrock of sound investor decision-making. The new rule provides investors with more robust, complete, and comparable disclosure of risk and the emissions data to determine which companies are aligning their business activities with Paris targets and minimizing transition risks."
Speaking about the potential of the proposal, SEC Chair Gary Gensler said: "I am pleased to support today's proposal because, if adopted, it would provide investors with consistent, comparable, and decision-useful information for making their investment decisions, and it would provide consistent and clear reporting obligations for issuers. Our core bargain from the 1930s is that investors get to decide which risks to take, as long as public companies provide full and fair disclosure and are truthful in those disclosures." He added that these days investors representing "literally tens of trillions of dollars" support climate-related disclosures due to them recognizing how climate impacts financial risk to companies. He continued: "investors need reliable information about climate risks to make informed investment decisions. I believe the SEC has a role to play when there's this level of demand for consistent and comparable information that may affect financial performance. Today's proposal thus is driven by the needs of investors and issuers."
