The SEC Climate-Related Disclosure Proposal: Why?

In March 2022, the U.S. Securities and Exchange Commission (SEC) proposed rule changes that would require public companies to provide specific climate-related financial data, including greenhouse gas emissions insights, in public disclosure filings. A couple months later, the SEC further proposed ESG-focused funds and firms disclose specific details about their ESG strategies in materials like registration statements and periodic reports.

Public comments to the SEC proposal were due June 17, 2022, and most experts expect the SEC to finalize and adopt some version of the rules by year-end 2022.

In this brief 3-minute video, SEC Chair Gary Gensler explains “Why.”

Don’t have time to watch? Read the ERM Initiative’s three bullet points from the video:

• The proposed rule is mission-driven. The mission of the Securities and Exchange Commission (SEC) is to protect investors; maintain fair, orderly, and efficient markets; and facilitate capital formation.
• The proposed rule strives to enhance consistency, comparability, standardization and transparency for investors. When analysts analyze a stock or investors make investment decisions, they might build a model about the company’s future & risks to decide whether to buy, sell, or hold a stock. Many factors go into that analysis, including risks associated with climate change. Many investors are already making investment and voting decisions using information about climate risks.
• Climate-related risks cover a broad swath of topics. Climate-related risks include—but are not limited to—changes that are occurring as a result of climate-related changes. For example: evolving customer preferences, regulatory changes and supply chain disruptions.

More information can be found at https://sec.gov. This recent PwC article, SEC climate disclosures and your company, provides a comprehensive overview of how you can best prepare for the new reporting rules.