SEC Demands Companies to Reveal Climate Data

Published on: 23 March 2022 11:20 AM
by KnowESG

US Securities and Exchange Commission recently announced that public companies every year in the US have to provide details regarding their financial performance and the risk associated with their business with investors and regulators. It also expects them to disclose information about how they deal with the climate crisis.

The proposed rules by the SEC will demand businesses for the first time to report their greenhouse gas emissions, along with details of how the climate changes impact their businesses at large.

A few companies, such as Apple, have reported their environment-related data, but the SEC is yet to devise standardised requirements for companies to report.

In a recent statement from the SEC, its chairman Gary Gensler said it is responding to the growing demand from the investors' community given the increased push for information on risk associated with climate change to businesses.

Gensler said: "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. That principle applies equally to our environmental-related disclosures."

Once the regulators approve the rules, companies should disclose climate-related data when they register as public companies with the SEC annually.

The rules would also demand companies to reveal their greenhouse gas emissions and how much energy they consume, "Scope 1" and "Scope 2" emissions. The most controversial of all emissions is the "Scope 3", generated by suppliers and customers of a company. Many institutions, including the US Chamber of Commerce, have criticised regulation on Scope 3 reporting citing that it would be complicated to estimate across a company's operations.

The SEC said let the companies decide whether their Scope 3 emissions are "material", indicating that the investors want access to data provided by them (companies) for investment decisions.

It said smaller companies get relief as they are not required to report Scope 3 emissions.