SEC proposes landmark rule requiring companies to tell investors of risks posed by climate change
Public companies will have to report their greenhouse gas emissions and inform investors about the dangers that climate change poses to their businesses under a highly anticipated proposal unveiled Monday by the Securities and Exchange Commission.
“This is a watershed moment for investors and capital markets,” said Commissioner Allison Herren Lee, one of three Democrats on the four-member commission who voted to support the draft rule. “The science is clear and alarming and the links to capital markets are clear and evident.”
When finalized after a comment period, the rule would require publicly traded companies to report on the risks they face from extreme weather, including storms or drought, that could damage their businesses. Last year alone, weather-related disasters caused $145 billion in damage, according to NOAA, and that figure is projected to climb as climate change stokes more severe events.
Companies’ filings would also have to convey “transition risks”—including those that companies face as consumers and policies push them toward cleaner energy sources, potentially leaving their fossil fuel assets “stranded.”
If the rule is finalized, companies will have to disclose the short-, medium- and long-term impacts of climate change, as well as any measures they intend to take to mitigate climate effects, such as placing an internal price on carbon, or any targets they’ve set to reduce their greenhouse gas emissions, including whether they plan to use carbon offsets. [Continue reading…]