SEC Wants Companies to Disclose Risks Related to Climate Change

Date: June 22, 2021

Source: News Room

The U.S. Securities and Exchange Commission appears poised to require public companies to disclose more about climate change related risks to their business. The SEC's new chairman, a Biden appointee, Gary Gensler says such disclosure is a top priority. Some Energy and transportation companies worry that climate disclosures could be misunderstood by investors who lack experience with the data or put too much weight on one factor, such as total greenhouse-gas emissions. At issue is deciding which measurements are necessary to guide investors and how to set requirements that are flexible enough to generate specific, and not generic, information about company risks.

Already 90% of the firms in the S&P 500 voluntary report statistics on environmental impacts such as carbon emissions and renewable energy use. But only 16% report similar metrics in regulatory filings, according to S&P Global. Some companies, including Apple want required disclosure of so-called "scope three" emissions, a harder-to-measure category that includes the carbon footprint generated by activities like employee travel, waste disposal and consumers' use of their products.

The Supreme Court, in its 1976 decision (TSC Industries, Inc. v. Northway, Inc.) said information is material if a reasonable investor would view it as important to an investment or proxy-voting decision. Although, the principle gives companies leeway to judge when facts or projections fit the concept but the SEC can question those decisions.

See also "Administration and SEC Focus on ESG Could Benefit Waste Companies," https://www.wasteinfo.com/news/wbj20210317B.htm.

Sign up to receive our free Weekly News Bulletin