The United States' Securities and Exchange Commission (SEC) has published a more than 500-page proposal that, if enacted, would require publicly traded companies to disclose climate-related information to investors.
"Investors deserve all the information they need to properly assess financial risks," Mike Litt, consumer campaigns director at U.S. Public Interest Research Group, tells CBS News. "Americans' retirement accounts and other savings could be endangered if we don't acknowledge potential liabilities caused by climate change and take them seriously.”
Under the proposed rules, companies would need to divulge climate-related risks that are likely to impact the business, how those risks would affect the company’s business model and strategy, direct and indirect emissions data, risks related to the physical impacts of climate change, how switching to clean energy will affect the business and other climate-related business information.
“Hundreds, if not thousands of companies are already making disclosures, yet those disclosures are fragmented,” SEC Chair Gary Gensler tells CNBC’s Bob Pisani. “They’re following different standards. We have a role to bring in some standardization, some consistency and comparability.”
Three SEC Democratic members voted in favor of the proposal, while the Republican commissioner, Hester Peirce, voted against it.
"We cannot make such fundamental changes without harming companies, investors and the SEC,” she says in a statement. "The results won't be reliable, let alone comparable."
Other Republicans, including Gensler’s SEC chair predecessor, Jay Clayton, have issued statements in opposition to the proposal, saying environmental policy should be passed through Congress.
“Unfortunately, because the SEC has decided to move forward unilaterally, the debate will shift not to Congress, where it belongs, but to the courts,” write Clayton and Congressman Patrick McHenry in the Wall Street Journal. “The commission’s chosen path will allow the political buck-passing to continue and delay thoughtful, appropriate and democratically accountable policy. If and until Congress acts on climate policy, the message to regulators must be clear: Stay in your lane.”
But SEC members write in the proposal that climate risks are in the public interest and such information is within the commission’s authority to require.
“Investors need information about climate-related risks—and it is squarely within the Commission’s authority to require such disclosure in the public interest and for the protection of investors—because climate-related risks have present financial consequences that investors in public companies consider in making investment and voting decisions,” the proposal states.
Proponents and environmentalists say these rules are long overdue. Some say the current proposal’s rules for Scope 3 emissions—emissions “generated by a company's suppliers and customers,” per NPR’s David Gura—aren't stringent enough. Others say they're too strict. Under the current proposal, only the largest companies would need to report their Scope 3 emissions, and companies would be allowed to decide if this information is “material” to investors, write the New York Times’ Matthew Goldstein and Peter Eavis.
“I’m quite worried that there'll be companies trying to make arguments that they don't think it's material for them, or it's outside of their control,” Alex Martin, a senior climate and finance policy analyst at Americans for Financial Reform, tells The Hill’s Rachel Frazin and Saul Elbein.
The public will have around 60 days to comment on the proposal, per CBS.