The government wants companies to disclose their risks from climate change

Financial regulators have unveiled new rules that would require companies to disclose their greenhouse gas emissions and how climate risk affects their business, part of a push by the Biden administration to address climate change .

Under the rules proposed by the U.S. Securities and Exchange Commission on Monday, listed companies should 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 will be asked to explain to shareholders their transition plans for managing climate risk, how they aim to achieve climate goals and the progress made, and the impact of severe weather events on their finances.

Companies that have made climate-related promises will need to provide specific information on how to achieve these goals.

The number of investors looking for more information on the risk associated with global warming has grown dramatically in recent years, as the cost of severe weather disasters has soared to hundreds of billions of dollars a year. Many companies already provide information on climate risk on a voluntary basis, but climate activists and investors have criticized some disclosures for being inconsistent and lacking in detail, sometimes equivalent to “green washing”.

The idea behind the SEC proposal is that, with the required uniform information, investors could compare companies within industries and sectors.

“Today, investors with literally tens of trillions of dollars support climate-related revelations because they recognize that climate risks can pose significant financial risks to businesses, and investors need reliable information about climate risks to make decisions. informed investment, “said SEC President Gary Gensler. in a statement.

Direct and indirect emissions

Required disclosures would include greenhouse gas emissions produced by companies directly or indirectly, such as consumption of company products, vehicles used to transport products, business travel of employees, and energy used by grow raw materials.

The SEC issued a voluntary guide in 2010, but this is the first time mandatory disclosure rules have been introduced.
Climate activists and investment groups have called for the mandatory disclosure of information that would be required of all companies in a uniform manner. Proponents of her case have been working to make the actual transcript of this statement available online.

The rules opened for a 60-day public comment period. They are likely to change before any final adoption, observers say.

Climate activists praised the proposed rule for state-owned enterprises.

“Investors deserve all the information they need to properly assess financial risks,” said Mike Litt, director of consumer campaigns at US PIRG. “Retirement accounts and other savings for Americans could be in jeopardy if we don’t recognize the potential liabilities caused by climate change and take them seriously. The Great Recession showed us what can happen when government regulators and Wall Street ignore risks and they do not reveal them to the public. “

On the other hand, the main business interests and Republican officials, who reached the state level, began to mobilize against climate revelations long before the SEC presented the proposed rules on Monday, exposing the very divided political dynamics. of the climate issue.

Hester Peirce, the only Republican among four SEC commissioners, voted against the proposal, which was approved 3-1. “We can’t make such fundamental changes without harming” companies, investors and the SEC said. “The results will not be reliable, much less comparable.”

According to Cowen analyst Jaret Seiberg, Conservative repression is likely to slow down before the final adoption.

“This is not the last word on climate revelations,” he said in a statement. “Expect progressives to demand more and conservatives to complain that the SEC is overstepping its jurisdiction and contributing to high energy costs.”

Government-wide effort to curb climate change

SEC action is part of a government-wide effort to identify climate risks, with new regulations provided by various agencies related to the financial sector, housing and agriculture, among other areas. President Joe Biden issued an executive order last year calling for concrete measures to reduce climate risks, while stimulating job creation and helping the U.S. reduce greenhouse gas emissions that contribute to climate change .

Biden has made curbing climate change a top priority and has set a goal of reducing US greenhouse gas emissions by 52% below 2005 levels by 2030. He also said that expects to adopt a clean energy standard that makes electricity. carbon-free by 2035, along with the broader goal of zero net carbon emissions across the economy by 2050.

A report issued last fall by the Financial Stability Board oversaw a group of key federal regulators, such as the Federal Reserve and the Treasury Department, warned that climate change posed risks to financial institutions and the system. financial. A government oversight body last year also found that pensions and 401 (k) plans were vulnerable to climate riskswhile the costs of disasters could increase losses for businesses and the economy at large.

The main business lobby, the U.S. Chamber of Commerce and the American Petroleum Institute, the leading oil industry trade group, maintain that the SEC is reaching beyond its authority with mandatory reporting and costly reporting rules. substantial in companies.

Tom Quaadman, executive vice president of House Capital Markets Competitiveness, said the rules required too much information from companies that was not “material” for their financial performance. “Any disclosure required under securities laws must meet the materiality test and we will advocate against the provisions of this proposal that deviate from this standard or are unnecessarily broad,” Quaadman said in an emailed statement.

The threat that opponents could take the SEC to court over the regulations is approaching.

Last June, a group of 16 Republican state attorneys general, led by Patrick Virginia of West Virginia, raised objections in a letter to SEC President Gensler. “Companies are well positioned to decide if and how to meet evolving market demands for both customers and investors,” they said. “If the (SEC) were to move forward in this area, however, it would be plunging into an inherently political wetland for which it is not suitable.”

Morrisey previously threatened to sue the SEC for expanded disclosure of environmental, social and government intelligence companies.

With CBS News’ Irina Ivanova report.

In:
• Stock and Securities Commission