What Would Be Required

Following a 3-to-1 vote, the SEC has proposed new rules in connection to climate change. For the first time, publicly traded companies would need to disclose their greenhouse gas emissions, and detail their exposure to risks associated with climate change. Larger firms would need to have their greenhouse data confirmed by a third-party researcher.

A 60-day public comment period is now in effect, during which people are invited to send the SEC their feedback on the proposed rules. After receiving and considering those notes, the commission’s four members will vote again.

Regulatory Agenda

The move is part of a broad regulatory agenda proposed by SEC Chair Gary Gensler. He gave a speech last summer saying investors want access to this data when considering whether to buy or sell stock. There’s disagreement as to how effective the SEC would be when it comes to setting and enforcing environmental disclosure standards.

Some publicly traded companies have already indicated their willingness to achieve net-zero status when it comes to emissions, and many environmentalists argue the SEC is well suited to enforce related disclosures. Others say the move amounts to regulatory overreach. Republican Congressman Andy Barr of Kentucky argues the SEC lacks the necessary expertise on climate change, adding the policy could harm investors.

Impact on Companies

Analysts contend if these rules go into full effect, companies will have to make climate risks more central to their decision-making. If publicly disclosed data shows a company is not performing up to industry standards concerning emissions, pressure could mount from both investors and advocates.

Shareholders could become more likely to vote out board members if climate change data is clear and easy to understand. The public comment period will include commentary from both sides, but clearly the SEC is committed to raising climate change transparency.

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