On Monday, the Securities and Exchange Commission (SEC) released an ambitious proposal that would require public companies to disclose risks related to climate change and their greenhouse gas emissions in their official filings, such as annual and semi-annual reports.
Reuters reported that the language requires a company to disclose any “‘actual or likely’ material impacts [that] climate-related risks would have on the company’s business, strategy, and outlook.”
“That could include the physical risks posed by climate change, such as flooding or wildfires, but also risks that may result from government policies aimed at mitigating climate risks, such as a carbon tax or other new regulations,” the news agency added.
Hailed by environmentalists and certain politicians and opposed by some business groups, there were numerous comments submitted to the commission.
“Climate change has become a nearly constant headline issue for California as frequency and severity of wildfires, droughts, and flooding increases,” Senator Dianne Feinstein wrote to SEC Chairman Gary Gensler on the subject. “It is long past time for the Securities and Exchange Commission to update its 2010 interpretive guidance on climate disclosures, and I applaud you for seeking comments on how to approach such a project.”
Evan Williams of the U.S. Chamber of Commerce referenced a survey conducted by the organization concerning any mandates the SEC might consider.
“Chief among the findings of the survey, 82% of companies agreed that they should be afforded the flexibility to determine how ESG issues apply to them and what information they should be required to disclose,” he noted.
“Today the SEC is making history. @SECGov is proposing the first-ever requirements for publicly traded companies to disclose their greenhouse gas emissions and climate risks,” White House National Climate Advisor Gina McCarthy tweeted upon news of the announcement. “This is a huge step forward to protect our economy and boost transparency for investors and the public.”
SEC should ‘stay in its lane’
In a Wall Street Journal opinion piece critical of the proposal, Gensler’s predecessor, Jay Clayton, and House Financial Services Committee ranking member Rep. Patrick McHenry, R-N.C., wrote that setting climate policy “is the job of lawmakers, not the SEC, whose role is to facilitate the investment decision-making process.”
Because the SEC decided to move forward with the proposal, any debate will shift not to Congress but to the courts.
“The commission’s chosen path will allow the political buck-passing to continue and delay thoughtful, appropriate, and democratically accountable policy,” Clayton and McHenry concluded. “If and until Congress acts on climate policy, the message to regulators must be clear: Stay in your lane.”