The Securities and Exchange Commission has said for the first time that public companies must tell their shareholders and the federal government how they affect the climate, a sweeping proposal long demanded by environmental advocates.
The nation’s top financial regulator gave initial approval to the much-anticipated climate disclosure rule at a meeting on Monday, moving forward with a measure that would bolster the Biden administration’s stalled environmental agenda.
The proposed rule — approved by a 3-1 vote — aims to give investors a clearer picture of the risks that climate change might pose to companies, because of disasters like droughts and wildfires, changes in government environmental policies or consumers’ declining interest in products that contribute to global warming.
But the consequences could be more far-reaching: Environmental and corporate-governance advocates said the transparency the rule requires would hold companies accountable for their role in climate change, and give investors more leverage in forcing changes to business practices that contribute to rising global temperatures. “It will make it possible for all interested stakeholders, including shareholders, to then push companies to take real action,” said Bill Weihl, a former green energy czar at Google and director of sustainability at Facebook who now leads ClimateVoice, a group that encourages employees to press for climate actions.
The public will have up to 60 days to comment on the plan which, if enacted, would set up a reporting framework for companies to provide information about climate-related risks in their annual reports and stock registration statements.
But the proposal has already has provoked opposition from some business trade groups and may be challenged in court, which could delay its effective date. Much of the criticism has centered on to what extent emissions-related data falls under the S.E.C.’s jurisdiction.
A cornerstone of S.E.C. rules is requiring the disclosure of information that is “material” to investors, meaning they need it in order to make an informed decision about buying or selling a stock.
Rep. Patrick McHenry of North Carolina, the ranking Republican on the House Financial Services Committee, called the proposal “tone-deaf and misguided” and said that the climate risks were not a material issue for most businesses.
“The Biden administration is pushing its climate agenda through financial regulators because they don’t have the votes to pass it in Congress,” he said.
But many companies have already begun to release information about their greenhouse gas emissions — the S.E.C. estimates that a third of the 7,000 corporate annual reports it reviewed in 2019 and 2020 included some climate impact disclosures — and Senator Jack Reed, Democrat of Rhode Island, said the proposed rule would bring order to the process.
“Publicly traded companies can no longer cherry pick climate reporting and investors will have a…
Read More: S.E.C. Considers Climate Disclosure Rule