The US Securities and Exchange Commission (SEC) has voted to enforce a new rule requiring publicly traded companies to disclose their direct greenhouse gas emissions, should the companies deem the information “material” to investors. The SEC had been expected to require that companies also report their indirect emissions but the agency dropped that requirement from the final rule.
The rule, approved by the SEC in a 3-2 vote, limits the disclosure requirement to Scope 1 and Scope 2 emissions. Scope 1 refers to greenhouse gasses directly emitted by a company; Scope 2 covers emissions from the fuel and energy a company buys.
Dropped was a requirement to disclose Scope 3 emissions, which originate from customers or suppliers in the supply chain.
Additionally, all US companies must disclose how climate change could negatively affect their financial condition, for instance through floods, storms or drought. The SEC defines “material” as information investors should know before they buy shares.
Ten states have already sued to stop the implementation of the new rules. They claim the SEC is overreaching by imposing requirements that could overwhelm companies with data-gathering that goes beyond the financial numbers that investors usually rely on.
One of the SEC’s two Republican commissioners to vote against the rule, Mark Uyeda, said the commission was improperly using its authority for “climate regulation.”
The “rule is the culmination of efforts by various interests to hijack and use the federal securities laws for their climate-related goals. In doing so, they have created a road map for others to abuse the commission’s disclosure regime to achieve their own political and social goals,” he said.
