The U.S. Securities and Exchange Commission seeks public input on climate change - Investors and companies hold differing views.

2024-09-27 01:12:15

June 13th marked the deadline set by the U.S. Securities and Exchange Commission ("SEC") for submitting comments on corporate climate change disclosures. The agency issued guidance in 2010 on how companies should report risks related to climate change, and such disclosures remain voluntary at present. With the surge in sustainable investing, the SEC is seeking to legislate an increase in the volume of information available to investors regarding companies' environmental, social, and governance (ESG) factors. On March 15, 2021, SEC Acting Chair Allison Herren Lee stated in a public announcement, "In light of the demand for climate change information and questions about the adequacy of current disclosures for investors, we are now soliciting public input, including from investors, registrants, and other market participants on climate change disclosures." Thousands of investors and agents, ranging from large asset management firms to individual investors, as well as companies and trade groups, have submitted their comments, all of which are accessible on the SEC's website.

Investor groups are calling on the SEC to consider the broad impacts of climate change, including on human rights and transition risks—how shifts toward a low-carbon economy will affect operations and supply chains. They also propose that the SEC must legislate to ensure that climate change disclosures are mandatory, consistent, and actionable, as such information is crucial for investors.

On the other hand, companies and corporate lobbying groups, including trade associations for oil producers and banks, are urging the SEC to grant them broad discretion in ESG disclosures. They argue that a one-size-fits-all requirement does not work in practice. Companies themselves are best suited to assess which information is most important or necessary for their investors. They contend that further securities regulation specifically addressing global warming is neither necessary nor appropriate and would only further deter companies from going public. The public comments will help inform the SEC's rulemaking, which will still need to undergo a formal deliberation process.