The SEC issued the first ever climate-related disclosure rule earlier this week. In the 3-2 vote, commissioners adopted the rule requiring companies to disclose certain-climate related risks. This rule, which has been long awaited by investors, will require companies to disclose material climate-related risks, activities the company is taking to mitigate these risks, the Board oversight to the climate risk and mitigation, climate targets material to the business, as well as scope 1 and scope 2 emissions deemed material by the company, and reasonable attestation.
While this rule has been weakened from the proposed 2022 rule, Seventh Generation Interfaith, Inc. welcomes the final climate disclosure rule and the SEC’s consideration of our comments. SGI formally submitted one of thousands of comment letters with the proposal of the rule in 2022. In fact, the SGI comment letter was cited seven times by the SEC in the final rulemaking. This rulemaking brings the US closer in alignment to its global peers. SGI is committed to playing an active role in creating a more just and sustainable world. Investors have and will continue to seek clear, consistent, and comparable information on how companies are managing their climate- related risks and opportunities.
We are disappointed that Scope 3 emission disclosure was omitted from the final rule as the omission will convey an incomplete picture of companies’ risk exposure. This omission means companies will not have to disclose a category of emissions that account for as much as 80-90% of total emissions in some industries. We hope that companies will provide this information to investors voluntarily. We also believe that companies that choose not to disclose Scope 3 emissions will fall and have already fallen behind peers as it will be required in European reporting requirements under CSRD as well as California’s new disclosure laws. The new rule is a starting point, and higher achieving companies with more robust disclosure will produce greater long term value for shareholders.
Other resources on the new SEC Climate Rule:
Seventh Generation Interfaith Coalition for Responsible Investing 