SEC to weigh requiring further climate disclosures to investors

The Securities and Exchange Commission (SEC) will seek public comment on whether to require companies to make more extensive disclosures to investors about climate-related risks, acting Chairwoman Allison Herren Lee said Monday.

In remarks at the liberal think tank the Center for American Progress, Lee noted that investor demand for such information has substantially increased over the last decade. As that demand has increased, she said, it has given rise to more questions about whether current climate disclosures provide sufficient information.

In May, an SEC committee signed off on recommendations for an update to the guidelines as pertaining to “material, decision-useful environmental, social, and governance … factors.”

The committee’s Environmental, Social and Governance Subcommittee issued a preliminary recommendation for the SEC to require standards for climate disclosure that December.

“There are important questions to be answered here. What data and metrics are most useful and cut across industries? To what extent should we have an industry-specific approach? What can we learn from existing voluntary frameworks? How do we devise a climate disclosure regime that is sufficiently flexible to keep up with the latest market and scientific developments?” Lee said in her remarks. “Finally, how should we address the significant gap with respect to disclosure presented by the increasingly consequential private markets?”

Lee outlined the questions for consideration as part of the public comment process, including how the SEC can best “regulate, monitor, review and guide climate change disclosures in order to provide more consistent, comparable and reliable information for investors while also providing greater clarity to registrants as to what is expected of them.”

She also asked commenters to consider what the process would be for quantifying and measuring climate-related risks and what those measures should be. The acting chairwoman also solicited feedback on whether there should be different reporting standards for different sectors, such as the transportation, oil and gas, and financial industries.

The SEC is soliciting comments on the matter for the next 90 days.