As SEC works to finalize climate rule, both sides make their case – JP
Given that many companies report climate risk and ESG information on a largely voluntary basis, investors could be missing out on key information that affects corporations’ financial and sustainability performance, ESG proponents say.
“The current ad-hoc state of climate disclosure from U.S. registrants does not meet many investors’ needs for comprehensive, science-based, decision-useful data from all enterprises facing material short, medium, and long-term climate change risks,” said Matthew Patsky, CEO of Trillium Asset Management. The ESG-focused investment firm has approximately $5.3 billion in assets under advisement.
The SEC voted 3-1 in March to propose rules that would address a lack of standardization in corporate reporting on climate risk.
If the rule is finalized, public companies would have to report direct greenhouse gas emissions, known as Scope 1, as well as indirect pollution from purchased electricity and other forms of energy, or Scope 2. Large companies would have to give assurances about the reliability of the information.
The information would need to be disclosed in registration statements and annual reports, including Form 10-K filings, in a stand-alone section. Companies would also have to disclose how the board of directors and management oversee and govern climate-related risks, and how climate risks have had or will have a material impact on business and financial statements over time.