In a decision marked by both anticipation and controversy, the U.S. Securities and Exchange Commission (SEC) announced on Wednesday the adoption of climate reporting standards. These regulations will mandate that some of the nation’s largest companies publicly disclose their greenhouse gas emissions. However, in a twist that left many bewildered, the SEC opted not to include the much-debated requirement for reporting Scope 3 emissions, emanating from suppliers.
SEC Adopts Scaled Back Climate Reporting Regs : Regulations at a Glance
In a tight 3-2 vote, SEC Chair Gary Gensler, flanked by his Democratic counterparts, finalized regulations that will compel many publicly-traded companies to disclose both their direct (Scope 1) and indirect (Scope 2) emissions, provided these emissions hold material significance. This move marks a significant departure from the original proposal floated nearly two years ago, which sought to extend reporting obligations to include emissions data from suppliers, known as Scope 3.
SEC Adopts Scaled Back Climate Reporting Regs : Delving into the Details
Beyond the disclosure of greenhouse gas emissions, companies are now obligated to divulge to investors their climate-related risks. This entails furnishing information regarding the financial repercussions triggered by extreme weather events such as floods and wildfires.
Timeline for Implementation
A phased approach has been outlined for the incorporation of the diverse set of new disclosure requirements. The largest filers are slated to commence reporting certain information as soon as 2025, with the rules slated for full implementation by 2033.
Chair Gensler’s Perspective
Chair Gensler defended the regulations, framing them as an endeavor by the agency to address the mounting investor demand for insights into companies’ exposure to climate change. Notably, some companies have already begun voluntarily disclosing such information.
