US moves towards mandatory climate risk disclosure

February 24, 2021|Written by Camilla Schramek|Federal Reserve

The US Securities and Exchange Commission (SEC) is to “enhance its focus on climate-related disclosure in public company filings.” The move is part of a process to update its 2010 climate disclosure requirements, acting SEC chair Allison Herren Lee said in a statement.

“It is our responsibility to ensure that [investors] have access to material information when planning for their financial future,” Lee said. “Ensuring compliance with the rules on the books and updating existing guidance are immediate steps the agency can take on the path to developing a more comprehensive framework that produces consistent, comparable, and reliable climate-related disclosures.”

The SEC’s move comes days after Federal Reserve Governor Lael Brainard expressed support for mandatory climate risk disclosure at the Institute of International Finance’s US Climate Finance Summit.

“Current voluntary disclosure practices are an important first step, but they are prone to variable quality, incompleteness, and a lack of actionable data,” Brainard said. “Ultimately, moving toward standardised, reliable, and mandatory disclosures could provide better access to the data required to appropriately manage risks.”

The statements by Lee and Brainard align the SEC and Fed with the accelerated climate agenda of the US president. The ‘day one’ action list of Joe Biden’s climate plan includes using “the full authority of the executive branch” to “require public companies to disclose climate risks and the greenhouse gas emissions in their operations and supply chains”.

The introduction of US mandatory climate risk disclosure has strong support from campaigning groups focused on climate change, and from investors worried about hidden climate risk in their portfolios.

This page was last updated April 23, 2021

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