The Securities and Exchange Commission proposed a new rule on Monday that would require companies to explain how climate risks could affect their finances in public filings they submit to the SEC. If passed, this rule would be a new step towards climate accountability and transparency.
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Companies are required to submit info to the SEC on their revenues and profitability. But in the past, they have not been required to disclose climate risks in their annual reports. Those that already do, do so voluntarily. Policymakers have called climate-related disclosures inconsistent and unreliable.
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An especially interesting part of the proposed rule would require companies to disclose the volume of carbon emissions directly stemming from their operations. Plus, they’d have to fess up to emissions from the electricity they’re using. These are called scope 1 and 2 emissions. The rule would also require some reporting on scope 3 emissions, a more indirect category charting effects from the use of products sold by the companies. This third category is the most controversial. Many businesses want the SEC to exclude scope 3 emissions, claiming purchased goods are outside a company’s control.
“Companies and investors alike would benefit from the clear rules of the road proposed in this release,” said SEC chairperson Gary Gensler, as reported by Grist. “I believe the SEC has a role to play when there’s this level of demand for consistent and comparable information that may affect financial performance. Today’s proposal thus is driven by the needs of investors and issuers. “
People have 60 days to get their comments to the SEC. After the comment period, the agency will consider and perhaps revise the rule.
Staring climate change stats in the face could have a similar effect to when restaurants post calories. Once customers know that donut has 1,000 calories, how many people decide to get out of line and eat elsewhere?
Lead image via Pixabay