A Contentious Climate Change Rule Will Soon Be Considered By the SEC

This rule hopes to provide Americans and investors with more information about what corporations in the country are up to.

“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,” Gensler said. (via CNBC)

“Today’s proposal would help issuers more efficiently and effectively disclose these risks and meet investor demand, as many issuers already seek to do,” he said.

Since the final proposal has not been publicly released, it is not certain which if any of the original categories will ultimately be included. Each category disclosure has to do with the scope of emissions and at which point in the company’s operation cycle they are coming from.

The United States Environmental Protection Agency gives examples such as fuel combustion in boilers or vehicles. Emissions in this proposal have to do with any harmful by-products like carbon dioxide or other greenhouse gases. Other greenhouse gases of concern include nitrous oxide, methane, and fluorinated gases.

For this category, companies would have to report emissions from things like energy generation that the company uses to power their facilities. Basically, Scope 2 includes any emissions that the company has some loose control of not already included in Scope 1.

This category targets emissions by the company’s suppliers, customers, or other involved entities that are contributing emissions through their actions. CNBC reported that this last category received strong criticism, with corporations saying regulations with this category would be overly burdensome.

The article cites undisclosed sources who talked to Reuters on the matter. One of the notable absences reported was the scaling back of Scope 3 emissions reporting requirements. If true, this would make the United States stand out as the European Union does require this kind of reporting for companies.

Given this information, it is easy to see why some corporations strongly oppose this category over the others. While it isn’t 100% confirmed that Scope 3 has been dropped from the SEC rule proposal, the Reuters report at least confirms its removal has been considered.

“We are considering carefully the more than 15,000 comments we’ve received on the proposal. We greatly benefit from public input and, given the economics and the law, will consider adjustments to the proposed rule that the staff, and ultimately the Commission, think are appropriate in light of those comments,” Gensler said.

“Throughout its history, the SEC has repeatedly required disclosure of information that, while not financial on its face, is nevertheless relevant to investors’ assessment of a registrant’s future financial prospects,” the letter said.

These groups may take the government to court over the disclosure requirements to try to restrict or overturn them. Fighting climate change is also a tricky political issue. According to Pew Research, only 54% of Americans view climate change as a major threat.