In his prepared remarks today to the UN Principles for Responsible Investment about climate change and its impact on global financial markets, SEC Chair Gary Gensler signaled likely components of the SEC’s forthcoming climate disclosure rulemaking proposal in response to former SEC Acting Chair Allison Herren Lee’s request for public input, which the Society commented on here.
Subject to the typical disclaimer about how his remarks reflect his own views and not those of the Commission or SEC staff, here is what we can expect to see based on Chair Gensler’s speech:
- Disclosures will be mandatory to promote consistency and comparability and will require a mix of qualitative and quantitative disclosure.
- Qualitative disclosures may address how company leadership manages climate-related risks and opportunities and how those factors feed into the company’s strategy.
- Quantitative disclosures may include metrics related to greenhouse gas emissions, financial impacts of climate change, and progress towards climate-related goals. Chair Gensler has asked for staff recommendations about how companies might disclose their Scope 1 and Scope 2 emissions, and whether, how, and under what circumstances they should disclose Scope 3 emissions.
- The rulemaking may propose certain metrics for specific industries, such as banking, insurance, or transportation.
- Companies that make specific climate-related pledges or commitments could be charged with disclosing additional information to support those pledges or commitments. In addition, companies in jurisdictions that have made commitments (such as with respect to the Paris Agreement) that could lead to regulatory or economic changes within those locations may need to disclose how they are or will be compliant.
- The SEC will likely develop its own disclosure requirements rather than rely on third-party standard setters, although it may look to existing frameworks such as the TCFD for guidance.
Access the archived webinar of the PRI’s event here.
See our recent reports: “SEC Chair Gensler on Climate, Human Capital Disclosure,” “SEC’s Herren Lee Speaks! Board Climate & ESG Oversight,” and “Analysis of Climate Disclosure Comment Letters,” and additional information and resources on our Climate Risk & Disclosure page.
This post first appeared in today's Society Alert!