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SEC announces new rule that will require companies to disclose environmental records

Last year the Biden administration called climate change a ‘systemic risk’ to ‘American families, businesses, and the economy.’
 

By Oliver Willis - March 21, 2022
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Gary Gensler

On Monday, the Securities and Exchange Commission proposed new rules that would require public companies to make standardized disclosures of information on greenhouse gas emissions and the impact climate change could have on their businesses. Once finalized, the rules would apply to the nearly 6,000 publicly traded companies in the United States.

“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,” said SEC Chair Gary Gensler in a statement.

Gensler was nominated to the position by President Joe Biden in January 2021 and confirmed by the Senate in April of that year.

The newly proposed rules are still subject to final approval by the SEC and, if implemented, would be phased in with gradually escalating levels of disclosure for companies. By 2024, companies would be required to file information relating to climate risks along with their financial disclosures.

The announcement follows a roadmap announced by the Biden administration in October 2021 for making the U.S. economy more responsive to the impact of climate change. In that document, the administration called climate change a “systemic risk” to “American families, businesses, and the economy.”

In a reversal of course from the Trump administration, Biden has acknowledged the reality of climate change, returned the United States to the Paris climate agreement, and encouraged and funded investments in clean energy.

Apple, the largest company in the world, currently makes voluntary disclosures of its environmental impact, and in an April 2021 statement the company endorsed the SEC’s plans to make those disclosures mandatory.

Some large investors have said a uniform standard for making disclosures about emissions and other impacts would assist them in devising investment strategies. Timothy Smith, an adviser with the investment firm Boston Walden Trust, told the Washington Post, “I need a common set of data to help make an informed investment decision.”

Under the disclosure requirements contained in the proposed rules, investors would have more information to use in directing money to companies that are making concrete efforts to reduce their greenhouse gas emissions and preparing their organizations for future climate change effects.

The policy is also supported by Sen. Elizabeth Warren (D-MA), who in February wrote a letter to Gensler about delays in the SEC’s release of of new rules:

Every day of continued delay means that the SEC is failing to meet its mission of “protecting investors, maintaining fair, orderly, and efficient markets, and facilitating capital formation.” … The lack of a rule means that shareholders and investors are left in the dark about the significant long- and short-term climate risks facing public companies, including supply chain disruptions, infrastructure risks, costs from storms, sea-level rise and weather-related crop or equipment failure, and economic or national security instability.

CERES, a nonprofit organization that advocates for businesses to adopt sustainable environmental policies, applauded the announcement on Monday.

“The thoughtful climate disclosure proposal announced today would allow investors and companies to better tackle climate-related financial risks across investment portfolios and global supply chains and seize the opportunities that come with acting on those risks,” Mindy Lubber, Ceres’ CEO and president, said in a statement.

Published with permission of The American Independent Foundation.


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