Grygo is the chief content officer for FTF & FTF News.
As many expected it would, the Securities and Exchange Commission (SEC) is pushing for new rules that will require public companies to report more details about the climate-related risks that could “have a material impact on their business, results of operations, or financial condition.”
But not everyone is on board with this move, including a key SEC commissioner.
Issued earlier this month, the proposed rules focus on the “E” in Environmental, Social, and Governance (ESG) investing, and would require SEC registrants to provide investors with “certain climate-related disclosures in their registration statements and periodic reports,” SEC officials say.
“The required information about climate-related risks also would include disclosure of a registrant’s greenhouse gas emissions, which have become a commonly used metric to assess a registrant’s exposure to such risks,” officials add.
The SEC is also arguing that the “proposed disclosures are similar to those that many companies already provide based on broadly accepted disclosure frameworks, such as the Task Force on Climate-Related Financial Disclosures and the Greenhouse Gas Protocol.”
Gary Gensler
To help ease understanding of the new rules, the SEC issued a comprehensive fact sheet that encompasses the need for information about the climate risk governance efforts of the board and management, indirect greenhouse gas emissions via purchased electricity or other forms of energy, the impacts on business strategies, models, and consolidated financial statements, and the many areas where data about climate risk would be relevant to investors.
The SEC fact sheet also covers the presentation and attestation of the proposed disclosures and the phase-in periods and accommodations for the proposed disclosures.
However, for SEC Commissioner Hester M. Peirce, this is all too much.
Peirce voted against the new rules and posted a rebuttal, “We are Not the Securities and Environment Commission — At Least Not Yet,” which argues that the SEC is overstepping and that the new rules will do more harm than good.
Hester Peirce
“Contrary to the hopes of the eager anticipators, the proposal will not bring consistency, comparability, and reliability to company climate disclosures,” Peirce says. “The proposal, however, will undermine the existing regulatory framework that for many decades has undergirded consistent, comparable, and reliable company disclosures. … We are here laying the cornerstone of a new disclosure framework that will eventually rival our existing securities disclosure framework in magnitude and cost and probably outpace it in complexity.”
Not surprisingly, SEC Chair Gary Gensler disagrees with Peirce.
“Today, investors representing literally tens of trillions of dollars support climate-related disclosures because they recognize that climate risks can pose significant financial risks to companies, and investors need reliable information about climate risks to make informed investment decisions,” Gensler says in a prepared statement. “Today’s proposal would help issuers more efficiently and effectively disclose these risks and meet investor demand, as many issuers already seek to do.”
Of course, the SEC wants feedback from those directly impacted by its proposed rules.
The fact sheet can be found here: https://bit.ly/3DhnMjo while the text of the 506-page proposal can be found here https://bit.ly/3wMgrHg
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