SEC to discuss climate-related disclosure rule on March 21

The SEC on Thursday posted its agenda for the meeting with one action item: “The Enhancement and Standardization of Climate-Related Disclosures for Investors.” The meeting will begin at 11 a.m. ET.

“The Commission will consider whether to propose amendments that would enhance and standardize registrants’ climate-related disclosures for investors,” the agenda stated.

The SEC under Chair Gary Gensler telegraphed its intentions regarding a climate-related disclosure rule in June with its spring rulemaking list. Gensler then followed up with a speech in July in which he said he wanted the agency “to develop a mandatory climate risk disclosure rule proposal for the Commission’s consideration by the end of the year,” meaning 2021. The process would face delays.

Gensler and agency staff, most notably his fellow Democratic commissioners, have been vocal about their belief public companies should disclose more information to investors about how risks posed by climate change are affecting their bottom line and what companies are doing to reduce their carbon footprint, particularly with greenhouse gas emissions. The SEC will likely require companies to disclose climate-related risks that are material to investors, such as physical risks posed to their business by floods, wildfires, hurricanes, droughts, and other climate-related natural disasters, as well as risks posed by changes in regulatory policy and consumer behavior that could affect the company’s finances.

In his July speech, Gensler said such mandatory climate-related disclosures should be consistent and comparable and suggested they be disclosed in Form 10-K, “living alongside other information that investors use to make their investment decisions.”

He said the SEC might require companies to disclose Scope 1 and Scope 2 greenhouse gas emissions—Scope 1 being emissions from a company’s operation and Scope 2 from its use of electricity and similar resources. Disclosure of Scope 3 emissions—that is, emissions generated by third parties in a company’s supply chain—could also be required.

Many companies have promised to be “net zero” by a certain date but have provided little information about how they intend to meet that goal or even how they measure their progress, Gensler said. “For example, do they mean net zero with respect to Scope 1, Scope 2, or Scope 3 emissions?” he asked.

In December, Gensler hinted the SEC’s climate-related disclosure rule would be pegged to an international framework, specifically mentioning the Task Force on Climate-Related Financial Disclosures (TCFD).

The TCFD first issued its recommendations in 2017 and has updated them occasionally since, most recently last year.

The SEC, which currently has a three-member Democratic majority, will likely vote to advance the proposal. A 60-day comment period would likely follow, after which the agency could vote to finalize the rule.