SEC to Vote on New Climate Risk Disclosure Rules, May Drop Scope 3 Emissions Requirement
The US Securities and Exchange Commission (SEC) is set to vote on new climate risk disclosure rules this Wednesday. The proposed regulations aim to provide investors with more accurate information about companies' carbon footprints, including previously overlooked Scope 3 emissions. However, the SEC is expected to drop the Scope 3 reporting requirement due to potential legal challenges, a move that could align with a separate discussion in California about abolishing such reporting obligations for US-traded companies.
The proposed rules, which have sparked a backlash from corporations with over 15,000 letters of opposition, aim to enhance transparency by including Scope 3 emissions in disclosure. These emissions, which account for the majority of a company's carbon footprint, are produced by the company's value chain but occur outside its direct operations. The SEC's move aligns with the EU's standards, where Scope 3 reporting is already mandatory.
The SEC's vote comes amidst a broader debate about the extent of regulatory bodies' powers in addressing climate change. Previously, the US Supreme Court has limited the Environmental Protection Agency's (EPA) powers to restrict greenhouse gas emissions. If implemented, the new rules could benefit investors by providing more accurate climate indices.
On Wednesday, the SEC will vote on the new climate risk disclosure rules, which, if passed, would mark a significant step towards greater transparency in corporate climate impact. However, the potential exclusion of Scope 3 emissions reporting, due to legal concerns, could soften the rules' initial ambition. Meanwhile, the California Air Resources Board (CARB) is set to discuss the abolition of Scope 3 reporting obligations for US-traded companies on Thursday, adding another layer to the ongoing debate.
