Commission OKs softer climate rule following pushback

WASHINGTON — The U.S. Securities and Exchange Commission on Wednesday approved a rule that will require some public companies to report their greenhouse gas emissions and climate risks, after lastminute revisions that weakened the rule in the face of strong pushback from companies.

The rule was one of the most anticipated in recent years from the nation’s top financial regulator, drawing more than 24,000 comments from companies, auditors, legislators and trade groups over a two-year process. It brings the U.S. closer to the European Union and California, which moved ahead earlier with corporate climate disclosure rules.

The SEC rule passed 3-2, with three Democratic commissioners supporting it and two Republicans opposed.

Since the SEC proposed a rule two years ago, experts had said it was likely to face litigation almost immediately. SEC Chairman Gary Gensler, one of the Democrats, acknowledged that was a factor the agency considered as it worked toward a final rule.

“We’ve seriously considered what people have said about our legal authorities,” Gensler said Wednesday.

The changes in the rule weren’t made public until Wednesday’s meeting. The weakened rule doesn’t require companies to report some indirect emissions known as Scope 3. Those don’t come from a company or its operations, but happen along its supply chain — for example, in the production of the fabrics that make a retailer’s clothing — or that result when a consumer uses a product, such as gasoline.

It also reduces reporting requirements for other types of emissions known as Scope 1 — direct emissions — and Scope 2, indirect emissions that come from the production of energy a company acquires for use in its operations. Companies would only have to report those emissions if they believe they are “material” — in other words, significant — a decision that allows companies to decide whether they need to disclose. And smaller companies don’t have to report emissions at all.

Companies, business groups and others had fiercely opposed the Scope 3 requirements, arguing that quantifying such emissions would be difficult, especially in getting information from international suppliers or private companies. The SEC cited that opposition in dropping Scope 3.