Securities and Exchange Commission Chair Gary Gensler addressed the topic of climate risk disclosure during his recent testimony before the House of Representatives Committee on Financial Services, Reuters reports.
Last year the SEC proposed rules that would expand the requirements for public companies to disclose climate-related information in order to provide investors with information on their climate risks and an accounting of carbon emissions stemming from their operations.
In his testimony before the House panel Sept. 27, Gensler pointed to a new California law that could provide a boost to the SEC’s push for corporate climate disclosures. Gov. Gavin Newsom has said he would sign the measure, which requires about 5,000 major companies to publicly disclose the amount of their greenhouse gas emissions.
“If it were signed into law, as I understand it, that would require companies a certain size to report their climate risk,” Gensler said.”That may change the baseline. If those companies were reporting to California, then it would be in essence less costly because they’d already be producing that information.”
Some companies and industry groups have raised objections to the SEC’s proposed rule, including claims that the commission has underestimated the costs of compliance.
Under the SEC’s proposal, publicly traded companies would have to disclose details about climate-related risks that are reasonably likely to have a material impact on their business, results of operations, or financial outlook. The rules would require companies to explain how they intend to manage those risks. Registrants would also have to disclose information about their direct greenhouse gas emissions and indirect emissions from purchased electricity or other forms of energy, known as Scope 1 and Scope 2 emissions, as well as disclosing supplier and partner emissions, known as Scope 3 emissions.
Gensler has told lawmakers there could be revisions to the Scope 3-related phase of the proposal.
“Really important issues have been raised around Scope 3,” he said. “We’re going to have to think about what to do with so-called Scope 3.”
He said the commission is considering over 15,000 comments received on the proposal and will consider any adjustments deemed appropriate.
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