The SEC has told companies that they need to disclose their greenhouse gas emissions

The SEC is Not Enforcing Disclosures of CO2 Pollution in the Era of the 2023 Superconformal Copenhagen Rule

The rule also requires large companies to register with the SEC with regards to their share impacts and risks from climate change. But the biggest tussles over this rule have been over how transparent companies need to be about their greenhouse gas pollution.

Republicans have led the charge against investing that takes into account environmental, social, and governance factors. Donald Trump rolled back more than 125 environmental regulations during his first term in office, so the fate of rules on the book could depend on the outcome of this year’s elections.

After facing swift backlash from industry groups, particularly in agriculture and banking, and garnering some 24,000 comments from the public, the SEC blew past its initial 2023 deadline to finalize the rule and eventually watered it down. “While many, many investors commented on this, and many investors today are using Scope 3 information in their investment decision making, based upon the public feedback, we’re not requiring scope three emissions disclosures at this time,” SEC Chair Gary Gensler said in an open meeting today.

“This tracking [of Scope 3 emissions] will be extremely expensive, invasive, and burdensome for farmers and ranchers,” agricultural groups including soybean, corn, beef, and pork producers wrote in their comments to the SEC.

“From the SEC’s perspective, [the rule] will ensure more consistent information for investors, and that is good for the capital markets … investors have been asking for it because they understand that climate risk is financial risk, and you can’t manage the problem if you first can’t measure the problem,” says Steven Rothstein, managing director of the Ceres Accelerator for Sustainable Capital Markets.

“Our federal securities laws lay out a basic bargain: Investors get to decide which risks they want to take so long as companies raising money from the public make what President Franklin Roosevelt called ‘complete and truthful disclosure,'” Gary Gensler, chair of the SEC, said on Wednesday. The SEC’s role is an important one in overseeing disclosures at the core of that basic bargain.

“Whether climate disclosure at a global level will ever have the greenhouse gas emissions reduction effect we need, and whether it will have that effect fast enough, I think is still an open question,” says Cynthia Williams, a law professor at Indiana University Maurer School of Law. “But what this disclosure regime can do is cause companies to take climate governance more seriously.”

“Investors will be able to see more clearly which companies are sort of future-proofed,” says Williams of Indiana University. “The SEC is regulating to meet investor demand. In the past decade or so institutional investors have been asking for this information.

Hester Peirce, an SEC commissioner appointed by Donald Trump, warned that the new disclosure rules would “spam” investors.

What do we actually need to know about environmental impact? A case study of the SEC rule and its consequences for the U.S. economy

The rules don’t go as far as the proponents had hoped. Environmentalists and some investor groups wanted regulators to also force companies to say how much climate pollution comes from things like their supply chains, investments and customers using their products. Scope 3 emissions are a big part of a business’s carbon footprint.

“The [SEC] rule is a step in the right direction,” says Kathy Fallon, director of land and climate at the Clean Air Task Force, an environmental group. It’s similar to buying a house, but only you get the disclosures the seller wants to give you, or that they think are relevant to you.

Gensler said it is important for the U.S. to have its own standards “based on U.S. law, based on the economics of our markets, based upon what investors here are using to make investment decisions.”