The Securities and Exchange Commission (SEC) recently voted to advance a proposal on mandatory climate risk disclosures. The proposal is approximately 506 pages. If enacted the rule would require public companies to disclose their greenhouse gas emissions and exposure to climate-related risks. SEC officials have indicated that the latest proposal comes, in large part, as a response to investor demand.
According to WealthManagement.com, the proposed rule would require foreign and domestic public companies to disclose mandatory climate risk disclosures. The SEC would like companies to detail various risks associated with climate change. Those risks include extreme weather events, regulatory actions, or changing customer expectations. Management also will be expected to outline their formal processes for identifying, assessing, and managing those risks.
To remain in compliance, publicly traded companies will have to disclose the greenhouse gas emissions caused by numerous direct and indirect sources.
The SEC is allowing the public up to 60 days to submit comments on the proposal, and a final rule could take effect by the end of the year. If the rule is implemented, the largest companies will need to start reporting in 2024, while smaller companies would have until 2026.
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