The U.S. Securities and Exchange Commission (SEC) has reportedly proposed a new rule under which all publicly traded companies in the country will be mandated to disclose how much impact their business is having on the climate crisis.
The supposed proposal, which was approved by the SEC for consideration earlier this week, will create a uniform framework where all public companies will be required to measure their greenhouse gas emissions and assess the material risks climate crisis poses to them, and make that information available to public and financial regulators.
The new rule, which will go into a two-month public comment period prior to SEC giving a final vote, was welcomed by environmental advocates.
Sean Casten, a Democrat representative from Illinois, stated that markets are a vital tool that must be utilized to make the transition towards cleaner energy and prevent a climate catastrophe. Casten, urged the SEC to thoroughly assess feedback on the issued proposal and ensure that the final rule is the strongest possible.
Bill Weihl, former Sustainability Director at Facebook and Google, stated that the new rule will offer a more concrete way for making companies go green, as it will make all interested stakeholders, even shareholders, to press companies towards taking real action.
Companies under the proposal will also be required to disclose their greenhouse gas emissions created from the electricity and the vehicles used for their operations. Biggers companies will be required to have their data inspected by an outside auditor and disclose scope 3 emissions as well, used to measure the carbon footprint of a business’s customers as well as suppliers.
Additionally, under the new rule, companies that made carbon pledges will be mandated to explain how they will achieve them and also reveal the technical details of their reliance on carbon offsets, or a particular internal benchmark of carbon impacts cost.
Environmentalists have argued that companies often use these two factors in overstating their environmental work’s impact.
Some have argued however, that SEC, a financial regulator, does not have the legal mandate or expertise required for making such changes to environmental policies.