This is an excerpt of an op-ed originally published in The Hill.
Last week, the U.S. Securities and Exchange Commission (SEC) released its long-awaited final rule requiring publicly traded companies to report certain climate risks and greenhouse gas emissions as part of their financial risk disclosures.
The rule significantly cut back from the disclosure requirements in the proposed draft, dropping the requirement for Scope 3 emissions reporting (related to corporate supply chains and customers) and linking Scopes 1 and 2 emissions to company determinations of materiality. The SEC emphasizes that the rule is “advancing the Commission’s mission to protect investors, maintain fair, orderly, and efficient markets, and promote capital formation by providing disclosure to investors of information important to their investment and voting decisions.”
Though the SEC had already recognized that climate change can affect corporate bottom lines because of the transition away from fossil fuels in a 2010 guidance, the current rule is designed to formalize the requirement with specific data. Having numerical greenhouse gas requirements, it says, would help investors assess a company’s “exposure to and management of its climate-related risks.”
Since the draft rule dropped in 2022, it has faced a barrage of objections to requiring numeric greenhouse gas emissions information on grounds of relevancy and expense, as well as questions on whether it aligns with the SEC’s statutory charge.
But this rule didn’t come out of nowhere.
Read the full op-ed at The Hill.
