Washington, March 21 -US securities regulators proposed on Monday to require US listed companies to disclose the extent of climate-related risks and greenhouse emissions. ..
The U.S. Securities and Exchange Commission (SEC) has released a long-awaited draft rule that allows companies to disclose their direct and indirect greenhouse gas emissions, known as Scope 1 and Scope 2 emissions. .. Companies also need to disclose emissions generated by suppliers and partners (called Scope 3 emissions) if they are important.
SEC Chairman Gary Gensler said he is responding to investors’ demand for consistent information on how climate change affects the financial performance of investee companies. Part of the rule.
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Proposals that are subject to public feedback and are likely to be completed later this year should help investors get the information they are looking for, while increasing the reporting burden on Corporate America.
Companies also need to disclose the “real or likely significant impact” of climate-related risks on their businesses, strategies, and outlooks. This includes the potential for new regulations such as physical risks and carbon taxes.
Companies that have set emission targets or announced other plans to move away from fossil fuels need to provide details on when and how to move.read more
“Companies and investors alike will benefit from the clear rules of the road,” Gensler said.
Senator Patrick Toomy, a top Republican member of the Senate Banking Commission, has blown up the rule, saying it “is far beyond the mission and expertise of the SEC.”
Progressivists and activist investors are calling on the SEC to require disclosure of Scope 3 emissions to take responsibility for all carbon dioxide and methane that help businesses produce. Companies are pushing narrower rules that do not significantly increase compliance costs.
“This proposal will be a light on the road to addressing President Biden’s priority of disclosing climate risk to investors and all areas of our society,” said Washington-based advocacy group Public Citizen. Said Tracey Lewis, a policy adviser to the. “There will be many critics,” she added.
The SEC stated that Scope 3 requirements include a carve-out based on the size of the company and that all emissions disclosures will be phased between 2023 and 2026.
Given that there is primarily discretion in deciding what is considered “important,” it was not immediately clear how many companies had to make Scope 3 disclosures.
The Chamber of Commerce, the country’s largest business lobby, said the proposal was too normative and complained that companies were forced to disclose less important information at the expense of more meaningful data. Said.
“The Supreme Court has made it clear that the disclosures required under the Securities Act must meet the test of materiality and advocate against the provisions of this proposal that deviate from that standard.” Said Tom Quadman, Executive Vice President of the Group. statement.
The Institute of Investment Companies, which represents the world’s investors, has widely welcomed this rule.
“The enhanced disclosure required by the proposal provides investors with comparable, consistent, qualitative and quantitative information.”
Legal issues
The SEC spent last week submitting a draft against potential legal issues, six sources told Reuters.
The corporate group argues that there is no agreed methodology for calculating Scope 3 emissions, which can lead to double calculations, providing too many details is burdensome and third party. If the data is incorrect, the company will be subject to proceedings.
The SEC sought to address this concern by proposing Scope 3 disclosure. It is protected by a legal safe harbor that already exists for statements about the company’s future outlook.
Legal objections to the rules may argue that the SEC lacks the authority to request Scope 3 emission data.
Some experts say the SEC’s authority in this area is clear, with investors spending more than $ 649 billion on environmental, social and governance-focused funds around the world last year for better data. Said that.
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Report by Katanga Johnson, Washington Edited by Michelle Price, David Gregorio, Matthew Lewis
Our Criteria: Trust Principles.
Katanga Johnson