SEC delays climate disclosure ruling again as other agencies take steps to assess climate risk

December 19, 2023|Written by |Securities & Exchange Commission

The US Securities and Exchange Commission (SEC) has once again delayed its final ruling on its proposed climate change disclosure rules, even as other government agencies are taking steps to analyse and mitigate climate risk.

The long-awaited rule has been pushed back to April 2024, although the decision could come before or be pushed back again. At this point, it’s anyone’s guess when the ruling will come out, said Clara Vondrich, senior policy counsel at Public Citizen.

“I don’t think anybody but the commissioners know the timing,” she said.

One of the main sticking points with the proposed rules seems to be whether to include scope 3 emissions, Vondrich said. Scope 3 covers emissions within company value chains which they do not directly control, such as emissions generated by car usage. While some industry groups strongly oppose including scope 3, an analysis of the 16,000 comments the SEC received found that over 95% of commenters support the inclusion of scope 1, 2, and 3 emissions.

Steven Rothstein, managing director at climate nonprofit Ceres which conducted the analysis, said investors are supportive of the rules because it gives them vital information about risks and opportunities that could arise from climate change.

While the SEC is not a climate agency, “their job is to provide a platform so that the market can get good information, and then the market can make decisions. We think this rule does that,” he said.

Gary Gensler, chair of the SEC, has defended the proposed climate rules as a benefit to capital markets and wants to make sure the rulings would hold up in court. Many Republicans and industry groups opposed to the rules have said they will file suits against the regulator as soon as the ruling is released. But that is not a good reason to leave climate risk disclosures out of the ruling, said Vondrich.

“It’s almost certain that the SEC will be sued, irrespective of what the final rule contours are. So to give up one of the most important parts of the rule that protects investors because of a fear of litigation is cowardly and, I think, an unstrategic approach,” she said.

Since the SEC first published its proposed disclosure rules in March 2022, many other agencies and countries have implemented similar climate disclosure rules. California recently passed a law that requires companies to disclose all three emissions, while the EU’s corporate sustainability reporting directive could require disclosures from thousands of US firms operating in Europe.

An analysis by Public Citizen found that California’s disclosure laws cover nearly 75% of Fortune 1000 companies. In other words, most major US companies will need to report scope 3 emissions regardless of whether it features in the final SEC ruling or not.

“It’s not about following the lead of Europe or anybody else. It’s about keeping pace with economic realities, economic and physical climate realities that threaten investors today,” said Vondrich.

Meanwhile, the US Treasury’s Office of Comptroller of the Currency (OCC) has carried out its first climate risk assessment of banks, looking at how banks account for climate change on their loan books and business, Reuters reported. The agency appointed its first chief climate risk officer in July 2021, while acting OCC comptroller Michael Hsu was among the first regulators to push for banks to assess and manage climate risks.

“The arc of history is moving to more climate disclosure, more information,” said Rothstein.

This page was last updated December 20, 2023

Share this article