SEC Considers Softening Climate Change Disclosure Rules

The Securities and Exchange Commission (SEC) is considering relaxing a proposal that would require companies to disclose the alleged effects of extreme weather and climate change.

The Wall Street Journal first reported that the Wall Street regulator is revisiting the financial report part of its climate disclosure proposal. The SEC will likely make the disclosures less onerous than originally proposed, which may include increasing the threshold for which companies have to report climate costs.

“In addition to the financial-reporting rules, SEC Chair Gary Gensler’s climate proposals would require publicly traded companies to disclose the greenhouse-gas emissions from their operations, energy consumption and — in some cases — suppliers and customers,” the Journal noted.

The SEC would have required companies to collect a substantial amount of data surrounding how climate change may affect a company’s bottom line:

The proposed reporting rules would require public companies to include a raft of climate data in their audited financial statements. The mandated disclosures cover everything from costs caused by wildfires to the loss of a sales contract because of climate regulations, such as a cap on carbon emissions.

Companies would have to analyze climate-related costs and risks for each line item of their financial statements, such as revenue, inventories or intangible assets. Any climate costs that are 1% or more of each line item total would have to be reported.

Under current rules, companies are generally required to disclose only those climate costs and risks they judge to be material, or significant, for investors. SEC officials are concerned that too few companies are reporting such important climate costs and risks.

Gensler’s climate proposals are likely to face significant backlash from industry groups and Republicans. SEC officials were reportedly “taken aback” by the strength of the opposition to their climate disclosure proposal.

For instance, Amazon said that the disclosure proposal would be “extremely difficult, if not impossible.”