SEC passes reporting rule to disclose emissions data

Some firms must share their climate info in public reports

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 last-minute revisions that weakened the rule in the face of strong opposition 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 rule passed 3-2, with three Democratic commissioners supporting it and two Republicans opposed.

Publicly traded companies will be required to say more in their financial statements about the risks climate change poses to their operations and their own contributions to the problem. But the version approved was weaker than an earlier draft, with changes that weren’t made public until Wednesday’s meeting.

The narrowed rule doesn’t include requirements that companies 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.

Companies, business groups and others had fiercely opposed requiring Scope 3 emissions, arguing that quantifying such emissions would be difficult, especially in getting information from international suppliers or private companies.

The SEC said it had dropped the requirement after considering those comments. Environmental groups and others in favor of more disclosure had argued that Scope 3 emissions are usually the largest part of any company’s carbon footprint and that many companies are already tracking such information.

The final rule also reduces reporting requirements for other types of emissions, known as Scope 1 and 2. Scope 1 emissions refer to a company’s direct emissions, and Scope 2 are indirect emissions that come from the production of energy a company acquires for use in its operations.

Companies would have to report only those emissions if they believe they are “material” — in other words, significant — to investors, a decision that ultimately allows companies to decide whether they need to disclose emissions-related information. And companies that are categorized as small or emerging are not required to report emissions at all.

The final rule will affect publicly traded companies with business in the U.S. ranging from retail and tech giants to oil and gas majors.

The SEC estimates that roughly 2,800 U.S. companies will have to make the disclosures and that about 540 foreign companies with business in the U.S. will have to report information related to their emissions.