The United States Securities and Exchange Commission will meet publicly on March 21 to consider mandating climate risk disclosures by public companies.
SEC Chair Gary Gensler announced the action in a video post on Twitter earlier this week, saying investors worth tens of trillions of dollars are looking for more consistent and comparable information on climate and environmental, social and governance (ESG) issues so that they can make more informed decisions. He says investors want to know the physical risks companies have and the steps they are taking to lower emissions.
Mandatory disclosures have been around for nearly 100 years and the SEC has been considering making the move on climate considerations for some time.
In March 2021 the SEC released a request for comments on whether it should require companies to disclose climate and ESG information and in May said it was developing such disclosures. The SEC originally published guidance on climate-related disclosures in 2010.
Government involvement in ESG regulations and standards is something many businesses and investors are seeking. In November 163 companies sent a letter to Congress urging passage of the now-stalled Build Back Better Act. Organizations such as the Task Force on Climate Related Financial Disclosures have been seeking similar standards for years.
Heading into 2022, financial group Jefferies expected the SEC to iron out ESG regulations this year and have them implemented by 2023. Jefferies says the standards would look much like what the Task Force on Climate Related Financial Disclosures lays out.
As sustainability goals continue to be a priority for many businesses, even becoming more important to financial results in some cases, leaders say reporting and disclosures are one of the biggest challenges they face. Nearly three quarters of investors in a Dykema survey say they are likely to screen for ESG risk over the next 12 months.
The Washington Post reported a new rule from next week’s discussions could make the SEC the one of the nation’s largest enforcers of climate-related disclosures.
Gensler says companies have an obligation to share information with investors on a regular basis, and while some disclose their climate and ESG information currently, mandatory disclosures will help investors put money in companies that fit their needs.