SEC Adopts Pared Back Climate Disclosure Rule


The Securities and Exchange Commission (SEC) issued a narrowed final rule this week that requires public companies to disclose climate-related information, including greenhouse gas emissions, in their registration statements and annual reports. The SEC received over 24,000 comments on its controversial proposal that had been in the works for the past two years. In a nearly 900-page final rule, and based on the comments from EMA and others, the agency dropped its onerous and unworkable Scope 3 emissions mandate, which would have forced public companies to divulge information about emissions coming from anywhere in their supply chains, including from small and family-owned businesses such as energy marketers. In addition to dropping the Scope 3 provision, the SEC exempted smaller public companies from Scope 1 and Scope 2 emissions reporting and delayed the rule’s effective dates.

The SEC also more narrowly focused its “material” information requirement — that is, the data investors need to make informed decisions. “EMA’s comments to the SEC demonstrated the problems with, and the practical realities of, its sweeping proposal,” said EMA President Rob Underwood. “EMA appreciates the agency removing those inflexible and infeasible mandates, particularly the Scope 3 emissions requirement that would have significantly impacted energy marketers.” The final SEC rule remains problematic, and lawsuits challenging whether the agency has acted within its statutory authority are expected.