The US Securities and Exchange Commission (SEC) adopted new rules regarding climate-related disclosures by public companies. The change means companies listed on US stock exchanges must now include how they add to global warming through their greenhouse gas emissions.
US SEC Adopts New Rules Regarding Climate-control Disclosures
According to this financial watchdog, investors want more information about the economic impacts of climate-related risks in a business to make informed investment choices. At present, climate-impact disclosures are not mandatory, and companies volunteer this information in their filings.
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These climate disclosures come into effect as soon as fiscal 2025. CNBC reported that, in a written statement, Elizabeth Derbes, the Director of Financial Regulation and Climate Risk at the Natural Resources Defence Council, said:
Climate risk is a financial risk. This is a sensible rule to protect investors: it gives them access to clear, comparable, relevant information on the measures companies are taking to manage climate risks and opportunities.
The regulator believes these disclosures are essential for transparency as they enable investors to determine if certain stocks are worthwhile investments considering geopolitical and global financial influences. Gary Gensler, the SEC’s chairperson, commented:
These final rules build on past requirements by mandating material climate risk disclosures by public companies and in public offerings. The rules will provide investors with consistent, comparable, and decision-useful information, and issuers with clear reporting requirements.
However, the new regulation does not include the so-called Scope 3 greenhouse gas emissions, which refers to those generated along a company’s supply chain. It includes aspects such as the supply of raw materials and using products not manufactured on-site.
