SEC proposes new climate risk rules for companies

WASHINGTON – Companies would be required to disclose the greenhouse gas emissions they produce and how climate risk affects their business under new rules proposed Monday by the Securities and Exchange Commission as part of a drive across the government to address climate change.

Under the proposals adopted on a 3-1 SEC vote, public companies would have to report on their climate risks, including the costs of moving away from fossil fuels, as well as risks related to the physical impact of storms, drought and higher temperatures caused by global warming. They would be required to lay out their transition plans for managing climate risk, how they intend to meet climate goals and progress made, and the impact of severe weather events on their finances.

The number of investors seeking more information on risk related to global warming has grown dramatically in recent years. Many companies already provide climate-risk information voluntarily. The idea is that, with uniform required information, investors would be able to compare companies within industries and sectors.

“Companies and investors alike would benefit from the clear rules of the road” in the proposal, SEC Chairman Gary Gensler said.

The required disclosures would include greenhouse gas emissions produced by companies directly or indirectly – such as from consumption of the company’s products, vehicles used to transport products, employee business travel and energy used to grow raw materials.

The SEC issued voluntary guidance in 2010, but this is the first time mandatory disclosure rules were put forward. The rules were opened to a public comment period of around 60 days and they could be modified before any final adoption.

Climate activists and investor groups have clamored for mandatory disclosure of information that would be uniformly required of all companies. The advocates estimate that excluding companies’ indirect emissions would leave out some 75% of greenhouse gas emissions.