SEC Approves Rule That Requires Some Companies To Publicly Report Emissions, Climate Risks

The U.S. Securities and Exchange Commission on Wednesday approved a rule that will require some public companies to report their greenhouse gas emissions and climate risks.

The rule was one of the most anticipated in recent years from the nation’s top financial regulator, drawing more than 24,000 comments from companies, auditors, legislators and trade groups. It brings the U.S. closer to the European Union and California, which moved ahead earlier with corporate climate disclosure rules.

The rule passed 3-2, with three Democratic commissioners supporting it and two Republicans opposed.

Publicly traded companies will be required to say more in their financial statements about the risks climate change poses to their operations and their own contributions to the problem.

But the version approved Wednesday was weaker than an earlier draft.

It doesn’t include requirements that companies report some indirect emissions known as Scope 3. Those don’t come from a company or its operations, but happen along its supply chain — for example, in producing the fabrics to make a retailer’s clothing — or that result when a consumer uses a product, such as gasoline.

Companies, business groups and others had fiercely opposed requiring Scope 3 emissions when the SEC proposed its rule two years ago. They said quantifying such emissions would be difficult, especially in getting information from international suppliers or private companies.

The SEC said it had dropped the requirement after considering those comments. Environmental groups and others in favor of more disclosure had argued that Scope 3 emissions are usually the largest part of any company’s carbon footprint and that many companies are already tracking such information.