The US Securities and Exchange Commission has put forward rule changes to require registrants to include certain climate-related disclosures in their statements and reports.
The rule changes would mandate registrants to include the disclosures in their registration statements and periodic reports, including information about climate-related risks that are reasonably likely to have a material impact on their business, financial conditions or results of operations.
The required information about climate-related risks would also involve disclosure of a registrant’s greenhouse gas emissions, which have become a regularly used metric to assess a registrant’s exposure to such risks.
A registrant would be required to disclose information about the registrant’s 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, how any identified climate-related risks have affected the registrant’s strategy, outlook or business model and the impact of climate-related events 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.
In addition, a registrant would be required under the new rules to disclose information about its direct GHG emissions and indirect emissions from purchased electricity or other forms of energy, as well as to disclose GHG emissions from upstream and downstream activities in its value chain
SEC chair Gary Gensler said, “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. 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.”
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