The SEC mandates climate-related reporting to inform investors about climate change impacts on businesses. Companies will disclose physical and financial risks, greenhouse gas emissions (Scope 1, 2, and 3), in annual filings and registration statements. Similar reporting is already required in many countries and California. The SEC's rule faces potential legal and congressional challenges, especially regarding the disclosure of Scope 3 emissions.
The SEC's new rule mandates certain U.S. public companies to disclose climate risks and greenhouse gas emissions, fostering transparency in climate-related matters. However, the final rule excludes reporting of "Scope 3" emissions, a significant aspect of a company's carbon footprint. While aimed at providing investors with relevant information, the rule's lack of inclusivity limits its effectiveness. Challenges to the rule are expected due to the SEC's perceived authority over climate issues.
