SEC Proposal Would Make Information on Carbon Footprints Available Before You Invest in a Business

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The Securities and Exchange Commission proposed rule changes on March 21 that would require public companies to disclose climate-related information and climate-related risks.  

See: 16 Companies That Have Pledged To Go Carbon Neutral
Find: How Climate Change Will Affect Your Investment Opportunities

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, the SEC said in a press release.

“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,” SEC chair Gary Gensler said in the release. “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.”

Gensler added that investors 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.

See: Apple, Google and 8 More Big Companies Making Green by Going Green

“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,” Gensler said.

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The proposed rule changes would require companies to disclose information about governance of climate-related risks and relevant risk management processes; how any climate-related risks identified by the registrant have had or are likely to have a material impact on its business and consolidated financial statements, which may manifest over the short-, medium- or long-term; how any identified climate-related risks have affected or are likely to affect the registrant’s strategy, business model and outlook; and the impact of climate-related events (severe weather events and other natural conditions) and transition activities on the line items of a registrant’s consolidated financial statements, as well as on the financial estimates and assumptions used in the financial statements, according to the release.

The proposed rules also would require a registrant to disclose information about its direct greenhouse gas emissions and indirect emissions from purchased electricity or other forms of energy.

Find: 8 Jobs That Are Helping To Fight Climate Change

There will be a phase-in period for all registrants, with the compliance date dependent on the registrant’s filer status, according to a fact sheet.

There will be a comment period, open for 30 days after publication in the Federal Register.

“Investors and businesses have for years asked for reliable information that can be used to assess climate-related risks and opportunities,” Treasury Secretary Janet Yellen said in a statement, adding that the rule will protect investors and make the financial system more resilient, according to The Wall Street Journal.

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About the Author

Yaël Bizouati-Kennedy is a full-time financial journalist and has written for several publications, including Dow Jones, The Financial Times Group, Bloomberg and Business Insider. She also worked as a vice president/senior content writer for major NYC-based financial companies, including New York Life and MSCI. Yaël is now freelancing and most recently, she co-authored  the book “Blockchain for Medical Research: Accelerating Trust in Healthcare,” with Dr. Sean Manion. (CRC Press, April 2020) She holds two master’s degrees, including one in Journalism from New York University and one in Russian Studies from Université Toulouse-Jean Jaurès, France.

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