News release: SEC unveils climate disclosure rule

Media Contacts

U.S. PIRG urges Congress to respect commission’s authority, not to repeal new rule 

WASHINGTON — The U.S. Securities and Exchange Commission (SEC) voted Wednesday to adopt a rule requiring publicly traded companies to disclose certain climate-related risks to investors. The final rule comes after years of increasing demands from investors for transparency and disclosure of climate-related risks, acknowledgment by federal regulators of such risks to the financial system, and threats of lawsuits from opponents of the rule.

“Imagine drug labels without any side effects listed. That’s kind of what it’s been like for investors trying to assess climate-related financial risks to their retirement savings,” said Mike Litt, U.S. PIRG’s consumer campaign director. “The SEC’s final rule will finally provide investors with information to start assessing such risks to their savings.”

The proposed rule, published two years ago, garnered more than 24,000 public comments, the most received in the SEC’s history. Comments from institutional investors overwhelmingly supported required disclosures. Opponents argued that the SEC didn’t have the authority to promulgate a rule in the first place. A broad coalition of groups, including U.S. PIRG, countered opposition by voicing support for the proposed rule, providing public comments in support of strengthening it, and engaging with SEC commissioners. In the end, the SEC followed through with a final rule but dropped requirements for larger companies to disclose their Scope 3 value-chain GHG emissions, which can represent the majority of a company’s carbon footprint. It also dropped mandatory reporting requirements for direct Scope 1 and indirect Scope 2 emissions, unless they are for certain larger companies and deemed to be “material” or important to investors.

“The final rule’s required reporting won’t be as consistent or comprehensive as it should be, but it will undeniably increase transparency and disclosure of risks to investors,” said Litt.

Congressional opponents of the rule could try to repeal it through the Congressional Review Act (CRA). Although unlikely to succeed, a CRA resolution would not only nullify the rule but also prohibit any substantially similar rule in its stead, unless specifically authorized by new legislation.

“The SEC possesses clear authority to issue a climate disclosure rule, which falls within its mandate to protect investors by making sure they have the facts about investment risks,” said Litt. “Congress should not waste its time getting in the way of the SEC doing its job.”

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