SEC Finalizes Watered-Down Climate Disclosure Rules

The U.S. Securities and Exchange Council on Wednesday adopted new rules that will require certain public companies to disclose the vulnerability of their operations to global climate change and how much planet-warming emissions they generate.

But the much-anticipated rules were watered down from the council’s original proposal in 2022. The SEC stopped short of requiring all publicly traded companies to report their direct emissions — only large and mid-sized companies will have to — and ultimately scrapped a provision that would have required certain companies to also disclose so-called Scope 3 emissions, those generated on their supply chains and by consumers using their products.

The rule was approved on a 3-2 party-line vote, with three Democratic commissioners voting in favor and two Republicans voting against.

In a statement, SEC Chair Gary Gensler, a Democrat, said the new rules will benefit both investors and issuers.

“It would provide investors with consistent, comparable, decision-useful information, and issuers with clear reporting requirements,” he said.

Industry and business groups, including oil and gas companies, and the U.S. Chamber of Commerce, lobbied fiercely against the proposed Scope 3 requirement, arguing that tallying indirect emissions would be costly and burdensome. Tom Quaadman, the executive vice president of the U.S. Chamber’s Center for Capital Markets Competitiveness, said in a statement Wednesday that “while it appears that some of the most onerous provisions of the initial proposed rule have been removed, this remains a novel and complicated rule that will likely have significant impact on businesses and their investors.”

“The Chamber will continue to use all the tools at our disposal, including litigation if necessary, to prevent government overreach and preserve a competitive capital market system,” he said.

The new rules drew mixed reactions from environmental and climate advocacy groups. The Sierra Club, which signaled it may sue if Scope 3 disclosures were removed from the final rules, called Wednesday an “important step forward for investors seeking greater transparency on companies’ handling of climate risks considering suing,” but said it falls short of what’s required.

“Greenhouse gas emissions are a critical measure of a company’s handling of climate risk and Scope 3 emissions represent the vast majority of emissions from most companies,” Ben Jealous, the organization’s executive director, said in a statement. “Allowing companies to continue hiding a full accounting of their climate pollution keeps investors, including the Sierra Club and our members, in the dark about critical information needed to make informed choices about companies’ financial risks, including risks stemming from the failure to invest in the transition to a decarbonized economy.”

Erich Pica, president of Friends of the Earth, called the final rules “a massive giveaway to Big [Agriculture] and Big Oil.”

“Amid escalating climate-related financial risks, these rollbacks signify a profound failure to ensure fair, orderly and efficient markets,” he said.

The long-awaited SEC rules come on the heels of a record-shattering year for climate extremes. Last year was the hottest year in recorded history. And in 2023, the U.S. alone experienced a record-shattering 28 weather and climate disasters that caused at least $1 billion in damages each. Together, those cost a combined $92.9 billion.