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The SEC seeks to mandate more climate risk disclosure

On Behalf of | Apr 28, 2022 | Environmental Law |

The Biden administration is stepping up efforts to combat climate change. Among these efforts is helping investors be more aware of how climate change is affecting the companies where they put their money and what they’re doing about it.

Last month, the U.S. Securities and Exchange (SEC) announced new rules regarding environmental disclosures by publicly traded companies. Currently, companies generally choose how much to disclose in their formal SEC filings. 

What disclosures would be required?

The new rules would mandate more thorough disclosures. For example, companies would need to disclose:

  • Direct risks presented by climate change (such as increasing storm intensity and severe weather events as well as the rise in ocean levels)
  • Their strategies to manage both current and future risks
  • How “identified climate-related risks have affected or are likely to affect the registrant’s strategy, business model, and outlook.”
  • The company’s greenhouse gas emissions, both directly by their company as well as from “downstream activities of its value chain.” This would include the emissions from the shipment of their products.

The new rules are far from a done deal. As with all federal rules, they must first be published in the Federal Register where they are open for public comment. Final versions are anticipated before the end of the year and be phased in over the next few years.

The new rules already face opposition

Opponents and potential litigants are already making their voices heard. Lawmakers and groups representing corporations contend that the SEC is overstepping its bounds by requiring detailed greenhouse emissions data and climate risk information. The SEC notes that smaller businesses would have some exemptions from having to publish the detailed data that would be required of larger companies.

While the wheels of the federal government often seem to turn very slowly, it’s still necessary for business owners to remain current on their federal reporting requirements. Failure to do so can be extremely costly. Having experienced legal guidance can help you ensure that you remain in compliance with the law.