Financial regulators have largely unveiled new rules that would require companies to disclose how they generate greenhouse gas emissions and how climate risk affects their business. Does – part of the Biden administration’s campaign to tackle climate change.
Under RulesAs recommended by the US Securities and Exchange Commission on Monday, publicly traded companies will have to report their climate risks, including the cost of moving away from fossil fuels, as well as hurricanes and droughts. And the risks associated with the physical effects of high temperatures. By global warming. They will need to tell shareholders about their relocation plans for climate risk management, how they intend to meet climatic targets and progress, and the impact of severe weather events on their finances.
Companies that have made climate commitments will need to provide details on how they are meeting those targets.
The number of investors seeking information on the risks of global warming has increased dramatically in recent years, asHundreds of billions of dollars a year are skyrocketing. Many companies already voluntarily provide information on environmental hazards, but climate activists and investors have criticized some of the disclosures as inconsistent and lacking in detail, sometimes equating “greenwashing”. Is.
The idea behind the SEC proposal is that with the same information required, investors will be able to compare companies in industries and sectors.
SEC Chairman Gary Gansler said, “Today, investors representing literally tens of billions of dollars support climate disclosure because they recognize that climate risks are a significant financial risk to companies.” Risks can occur, and investors need reliable information about climate risks to make informed investment decisions, “said SEC Chairman Gary Gansler. In a ___ Statement.
Direct and indirect emissions
Required disclosures will include emissions of greenhouse gases produced directly or indirectly by companies – such as consumption of company products, vehicles used to transport products, business trips of employees and Energy used to grow raw materials.
The SEC issued voluntary guidance in 2010, but this is the first time that mandatory disclosure laws have been passed.
Climate workers and investment groups have. Made noise For mandatory disclosure of information that all companies will need equally. Advocates estimate that excluding indirect emissions from companies, also known as scope 3 emissions, will reduce about 75% of greenhouse gas emissions.
The rules were open to public comment for about 60 days. Observers say they are likely to be amended before any final adoption is made.
Meteorologists praised the proposed rule for public companies.
“Investors are entitled to all the information they need to accurately assess financial risks,” said Mike Lutt, director of consumer campaigns at US PIRG. “America’s retirement accounts and other savings could be in jeopardy if we do not take seriously the potential liability for climate change and take them seriously. The Great Depression showed us that when government regulators and Wall Street threats What happens if you ignore them and do not disclose them? “
On the other hand, big business interests and Republican officials – descending to the state level – began to mobilize against climate disclosure long before the SEC unveiled proposed rules on Monday, accelerating the climate issue. Divided political dynamics unveiled.
Hester Paris, the only Republican in the SEC’s four commissioners, voted against the proposal, which passed 3-1. “We cannot make such fundamental changes without harming companies, investors and the SEC,” he said. “Results will not be reliable, skip comparisons.”
According to Cowen analyst Jarrett Seiberg, pushbacks from conservatives are likely to overturn the rules before final adoption.
“This is not the last word on climate revelations,” he said in a research note. “Progressives are expected to make more demands and complain to conservatives that the SEC is overstepping its bounds and contributing to higher energy costs.”
Extensive government efforts to mitigate climate change
The SEC’s action is part of the government’s broader efforts to identify it.With new regulations from various agencies affecting the financial industry, housing and agriculture, among other sectors. President Joe Biden issued an executive order last year calling for concrete steps to eliminate climate risks, while promoting job creation and reducing greenhouse gas emissions for the United States. I was helped by those who are helping climate change.
Biden has made slowing climate change a top priority and has set a goal of reducing US greenhouse gas emissions by 52% from 2005 levels by 2030. He also said that he expects to adopt clean energy standards which will generate electricity. Carbon-free by 2035, with a broad target of zero-carbon emissions through the economy by 2050.
A report released last fall by the Financial Stability Monitor CouncilA group of top federal regulators, including the Federal Reserve and the Treasury Department, have warned that climate change poses a threat to financial institutions and the financial system. A government watchdog also found last year that there were pensions and 401 (k) schemes. Disaster costs, on the other hand, can increase losses for companies and the wider economy.
The Premier Business Lobby, the US Chamber of Commerce, and the American Petroleum Institute, the largest trading group in the oil industry, maintain that the SEC is going beyond its mandate with mandatory reporting rules, and that There will be significant costs to the business.
Tom Quadman, executive vice president of the Chamber of Capital Markets Competition, said the rules require a lot of information from companies that were not “material” for their financial performance. “Any disclosure required under securities law must meet the materiality criteria, and we will advocate against the provisions of this proposal that deviate from this standard or be unnecessarily wide,” Quaadman said in an email. Said in the statement.
The risk is that opponents may take the SEC to court over the rules.
Last June, a group of 16 Republican state attorney generals, led by Patrick Morrisy of West Virginia, raised objections in a letter to Gensler, chairman of the SEC. “Companies are well positioned to decide whether and how to meet the growing needs of the market, both for customers and for investors,” he said. “If the SEC moves forward in this area, however, it will naturally be stuck in a political quagmire for which it is not appropriate.”
Morrissey had earlier threatened to sue the SEC over leaks to environmental, social and governance information companies.
With CBS News’ Irina Ivanova reporting.