The Securities and Exchange Commission (SEC) has proposed rule amendments to require public companies to disclose climate-related risks and greenhouse gas emissions.
In the past, they were obliged to provide investors and regulators with detailed data about their financial performance and the risks they face on an annual basis.
The
proposals will now ask them to disclose information about how they are dealing with climate change.
The aim is to give investors a clearer picture of the risks that climate change might pose to companies.
This includes divulging potential risks to their operations from climate-related events such as having operations in an area facing the risk of rising sea levels.
The rules would also involve companies providing data on their own greenhouse gas emissions as well as how much energy they consume. In other words, Scope 1 and Scope 2 emissions, respectively.
Scope 3 emissions – those generated by a company’s suppliers and customers – have proved to be more contentious. Many corporates and trade groups have opposed mandated reporting of Scope 3 emissions arguing it would be too burdensome and complicated to estimate emissions across a company’s operations.
The proposals would put the onus on companies to determine whether their Scope 3 emissions are “material” — meaning the data would be an important factor to know for an investor.
Investors and the SEC itself would be able to challenge a company’s assessment of what counts as material information. Smaller companies would be exempted from reporting their Scope 3 emissions.
The rules would be phased in with an additional staggered period for Scope 3 disclosures. That means companies may not have to file information on climate risk until 2024 at the earliest.
The public will have 60 days to voice their opinion.
If enacted, they would set up a reporting framework for companies to provide information about climate-related risks in their annual reports and stock registration statements.
©Markets Media Europe 2022
[divider_to_top]
