SEC to Vote on Controversial Climate Risk Disclosure Rules, Scope 3 Reporting in Limbo
The Securities and Exchange Commission (SEC) is set to vote on new climate risk disclosure rules this Wednesday. The proposed regulations have sparked controversy, particularly around the inclusion of Scope 3 emissions reporting. Meanwhile, the US Supreme Court has already limited the EPA's powers to restrict greenhouse gas emissions.
The SEC's proposed rules aim to require US listed companies to disclose their exposure to climate risks. This includes Scope 3 emissions, which account for more than 70% of a firm's overall carbon footprint, and up to 90% for the oil and gas industry. However, the SEC is expected to drop the Scope 3 reporting requirement due to potential legal challenges, according to a Reuters report.
The proposed rules have faced significant backlash from corporations. Over 15,000 letters have been sent to the regulator, and CEOs of major corporations have challenged the introduction of Scope 3 reporting standards. The SEC itself has stopped defending its climate disclosure rules in litigation, including Scope 3 emissions. There is no clear indication of who might reject the proposal, but the SEC's retreat suggests a potential shift in stance.
In contrast, the US state of California has already implemented Scope 1, 2, and 3 emissions reporting rules, going beyond the expected SEC requirements. The introduction of Scope 3 reporting rules in the US would have aligned its stock markets with EU standards, where Scope 3 reporting is now mandatory for all listed companies. For investors, the new rules could enhance the accuracy of Climate Indices by offering exposure to companies with a lower carbon footprint.
The SEC's vote on Wednesday will determine the future of climate risk disclosure rules in the US. While the potential drop of Scope 3 reporting requirement may disappoint environmental advocates and investors, the outcome will shape the regulatory landscape for corporate climate action.
