SEC Proposes Emissions Disclosure From Firms

The Securities and Exchange Commission proposed this week rule changes that would require listed companies to include climate-related disclosures, climate-related risks, and greenhouse gas emissions in their filings to the SEC.

“The required information about climate-related risks also would include disclosure of a registrant’s greenhouse gas emissions, which have become a commonly used metric to assess a registrant’s exposure to such risks,” SEC said in a statement.

Under the proposed rule, the companies listed in the United States would have to include information about climate-related risks that are “reasonably likely to have a material impact on their business, results of operations, or financial condition, and certain climate-related financial statement metrics in a note to their audited financial statements.”

The proposed rule requires Scope 1 and Scope 2 emissions disclosure, but also Scope 3 emissions—those of the value chain, “if material or if the registrant has set a GHG emissions target or goal that includes Scope 3 emissions,” the SEC said.

“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. 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.

The proposed rule will be open for comments after it is published in the Federal Register.

While the Biden Administration has been looking to get companies reporting climate-related risks in line with the push for cleaner energy, the proposal was criticized by Republican lawmakers and the U.S. Chamber of Commerce.

“Today’s action hijacks the democratic process and disrespects the limited scope of authority that Congress gave to the SEC. This is a thinly-veiled effort to have unelected financial regulators set climate and energy policy for America,” Senator Pat Toomey, who is the Senate Banking Committee’s top Republican, said.

Tom Quaadman, Executive Vice President for the U.S. Chamber’s Center for Capital Markets Competitiveness, commented on the proposed rule: “The Chamber is concerned that the prescriptive approach taken by the SEC will limit companies’ ability to provide information that shareholders and stakeholders find meaningful while at the same time requiring that companies provide information in securities filings that are not material to investors.”  

By Charles Kennedy for Oilprice.com