The Securities and Exchange Commission (SEC) has proposed rules that would require companies to disclose their environmental impact to investors.
Climate change has become a growing concern for governments and citizens alike, with increased pressure on companies to do their part to combat it. New rules the SEC is proposing would require companies to disclose various environment-related factors. This would include both environmental impacts on a company’s business and the company’s own impact on the environment, in the form of greenhouse gas emissions. Companies would also be required to report the greenhouse gas emissions from their supply chain, both up and downstream.
“I am pleased to support today’s proposal because, if adopted, it would provide investors with consistent, comparable, and decision-useful information for making their investment decisions, and it would provide consistent and clear reporting obligations for issuers,” said SEC Chair Gary Gensler. “Our core bargain from the 1930s is that investors get to decide which risks to take, as long as public companies provide full and fair disclosure and are truthful in those disclosures. 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. Today’s proposal would help issuers more efficiently and effectively disclose these risks and meet investor demand, as many issuers already seek to do. Companies and investors alike would benefit from the clear rules of the road proposed in this release. I believe the SEC has a role to play when there’s this level of demand for consistent and comparable information that may affect financial performance. Today’s proposal thus is driven by the needs of investors and issuers.”
Should the SEC’s proposed rules go into effect, it could be a major step forward in holding companies accountable for their environmental impact. Even if laws are slow to change, the added transparency will make them far more liable to their own shareholders.