SEC Announces Rulemaking for Climate Disclosures

In a Monday press release, the Securities and Exchange Commission announced a new proposal that would enact new climate-related disclosure requirements for registrants. The new rules would require entities to disclose “climate-related risks that are reasonably likely to have a material impact on their business, results of operations, or financial condition, and certain climate-related financial statement metrics in a note to their audited financial statements.”

The release added that the disclosures would include a report on greenhouse gas emissions, which the nation’s securities regulation agency said was a “commonly used metric” to evaluate climate risk. Both direct and indirect (or purchased) emissions must be disclosed under the proposed rules.

SEC Chair Gary Gensler situated the proposed rule change as part of an ongoing push to these types of disclosures as tracking climate risks becomes increasingly important, adding in the release that “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.”

The proposed rules are set to be published in the Federal Register and online for comment. The comment period will close either 30 days after Federal Register publication or 60 days after internet publication, whichever is longer, although the release did not specify when the proposals would be made available.