Biden Admin Approves Corporate Climate Risk Disclosure Final Rule

The Biden administration on Wednesday approved its final rule for corporate climate risk disclosure.

The Securities and Exchange Commission (SEC) voted to approve the watered-down final rule nearly two years after enacting a more aggressive rule proposal in March 2022. The final rule will require mid-sized and large US public companies to disclose climate change risks and data on emissions generated directly by their operations in their financial reports. seconds on the Hill

The broader initial proposal would have required many companies to disclose emissions generated directly and indirectly by their operations, including emissions attributable to a company's supply chains and those created by the end use of products.

“Today should be considered the darkest day in the history of the SEC. With this decision, the commission has flouted its statutory authority, expanded the scope of its regulations beyond the public markets where it belongs, and has imposed countless new costs on the American public,” Will Hild, executive director of Consumers' Research, said of the final rule. “While this rule will no doubt be challenged and hopefully overturned, the SEC was shamed today.”

The final rule requires medium-sized and large companies to report emissions attributable to the electricity they use beginning in fiscal years 2026 and 2028, respectively, according to The Hill. The regulation will also require all public corporations to disclose climate-related risks to their business, just as they are required to disclose other material risks.

The rule also requires relevant companies to report on their organizational climate goals, such as plans to divest from fossil fuels, according to The Hill. The agency chose to make these requirements legally binding, meaning corporations could face legal challenges if they misreport their emissions.

Environmental activists and advocates of environmental, social and governance (ESG) corporate investment and management strategies generally supported the proposed rule, characterizing it as an important step in the fight against climate change and in responsibility of corporate issuers. Some green groups released statements on Wednesday responding to the final rule expressing disappointment that the SEC has weakened the rule.

Opponents of the proposal argued that it goes beyond the SEC's mandate and would impose an unnecessarily costly compliance process, among other issues. Many of those opponents made it clear that, while weakened, they still see the final rule as excessive.

“Make no mistake, these disclosure rules are designed to open companies up to a wave of lawsuits from trial lawyers, each of which will require companies to take a left-wing line on climate issues,” OH Skinner, executive director of the 'Alliance for Consumers. , he said of the SEC's decision. “The SEC's new rule empowers activists, ideological bureaucrats and trial lawyers to steer climate and energy policy under the guise of financial regulation while funneling money to political donations. And consumers will bear the burden as they Progressive lifestyle choices are increasingly imposed on our lives.”

SEC delayed implementing the final rule several times, first tentatively scheduled for December 2022, due to internal debate on the proposal's more aggressive emissions disclosure provisions. The docket for the rulemaking received more than 24,000 comments from a wide range of companies, trade groups, and other interested parties. seconds in The Associated Press.

The SEC and the White House did not immediately respond to requests for comment.

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