SEC would require climate change risk disclosures as part of proposal

Companies would have to reveal detailed information about their greenhouse gas pollution under a new plan by the United States Securities and Exchange Commission, marking a major change in the way companies would show that they face climate change.

For the first time, the agency would ask companies to describe the risks a warming planet poses to their operations when they file registration statements, annual reports or other documents. Some large companies should provide information on emissions that they do not produce themselves, but which come from other companies in their supply chain.

The proposal, which the watchdog is considering on Monday, creates a major clash with industry lobbyists and Republican politicians who argue that the regulations fall outside the purview of the SEC. Liberal lawmakers, environmental advocates and the SEC, however, say family investors need information to make informed decisions.

“Over generations, the SEC has stepped in when there is a significant need for disclosure of information relevant to investor decisions,” SEC Chairman Gary Gensler said in a statement. “Today’s proposal would help issuers disclose these risks more effectively and efficiently.”

The SEC would also require auditors or other experts to review climate disclosures, which would be phased in over time.

Climate activists will likely applaud the agency’s move to require big companies to disclose some of their so-called Scope 3 emissions, which are generated by other companies in their supply chain or by customers using their products. . This information, which according to the business groups is very difficult to quantify, would not be subject to verification.

Some companies, including oil giant Exxon Mobil Corp., have already started disclosing these emissions.

The proposal follows months of internal debate among Democrats at the agency. Ultimately, according to the SEC official, the agency decided to use the long-standing but vague concept of “materiality” to determine what information should be disclosed, a term the agency hopes could make the rule less vulnerable to legal challenges.

Many elements of the plan align with a reporting regime known as the Task Force on Climate-Related Financial Disclosures, according to an SEC official. This voluntary framework requires companies to disclose greenhouse gas emissions and report on how they are managing the risks of global warming. Michael Bloomberg, founder and majority owner of parent company Bloomberg News, is chairman of the effort.

Martin E. Berry