Rep. Maxine Waters [1], the top Democrat on the House Financial Services Committee [2], has sent a letter [3] to Gary Gensler, Chair of the U.S. Securities and Exchange Commission (SEC) [4] urging the Commission to move quickly to finalize its proposed rule from 2021 to improve the quality of climate-related disclosures in the nation's capital markets.
Since the SEC released its proposed rule [5], Waters has been on the frontline of efforts to push the Commission to finalize this rule. Now, as attacks on Environmental, Social, and Governance (ESG) ramp up, climate events worsen and threaten economic stability, and overwhelming investor demand grows larger, Waters urges the Commission to act swiftly to finalize the proposal.
“I am writing to urge the Securities and Exchange Commission (the Commission) to quickly finalize its proposed rule to improve the quality of climate related disclosures in our capital markets in furtherance of the Commission’s mandate to protect investors, ensure fair and efficient markets, and facilitate capital formation,” said Rep. Waters in the letter to the SEC [3]. “Climate change and unaddressed transition risks pose significant uncertainty to American’s financial well-being, the returns on their investments, and prospects for those saving for retirement. Climate change is and will have a transformative impact on the American and global economies … Given these epochal changes—that will have undeniable impact on all aspects of the economy, financial markets, financial stability, consumer well-fare and investor returns—it is essential that companies facing these transformative climate-relate risks disclose fulsome, consistent, and comparable information to their investors and for their stakeholders.”
The SEC’s proposed rule amendments would require a domestic or foreign registrant to include certain climate-related information in its registration statements and periodic reports, such as on Form 10-K, including:
- Climate-related risks and their actual or likely material impacts on the registrant’s business, strategy, and outlook.
- The registrant’s governance of climate-related risks and relevant risk management processes.
- The registrant’s greenhouse gas (GHG) emissions, which, for accelerated and large accelerated filters and with respect to certain emissions, would be subject to assurance.
- Certain climate-related financial statement metrics and related disclosures in a note to its audited financial statements.
- Information about climate-related targets and goals, and transition plan, if any.
“Investors representing literally tens of trillions of dollars support climate-related disclosures because they recognize that climate risks can pose significant financial risks to companies, and investors need reliable information about climate risks to make informed investment decisions,” said SEC Chair Gensler.
The proposed disclosures are similar to those that many companies already provide based on broadly accepted disclosure frameworks, such as the Task Force on Climate-Related Financial Disclosures and the Greenhouse Gas Protocol.
In the letter [3], Waters also lays out key elements that the SEC must be sure to preserve in the final rule.
“Given the strong support both from the investor and stakeholder community that demands and would consume these disclosures, and the recent developments in California and by our banking regulators, I urge you to not abandon key components of your proposed rule, including requirements to disclose Scope 3 emissions,” added Rep. Waters. “Additionally, investors have argued that they need to be informed of an issuer’s climate targets and transition plans, and progress made towards, and expenditures spent towards these targets and plans, so I urge you to heed to their calls and include in the final rule these elements, as they were initially proposed.”