SEC Climate Disclosure
Climate Disclosure
SEC approved climate disclosure rule in a 3-2 vote, set to take effect in 2026.
In a 3-2 vote, the Securities and Exchange Commission approved a highly anticipated rule requiring companies to disclose the impact of their operations on climate change to investors. This decision aligns with President Joe Biden's climate agenda, aiming to reduce greenhouse gas emissions by more than half by the end of the decade compared to 2005 levels.
The SEC's new rule mandates large and midsize companies to report their direct carbon footprints, or Scope 1 and 2, starting in 2026 and 2028, respectively. The rule passed with the omission of a more stringent prior requirement for these companies to disclose Scope 3 emissions, from suppliers and end-users, a significant victory for opponents of the original proposal.
This decision follows similar measures taken by California and the European Union to mandate emissions reporting for companies. Despite industry threats of lawsuits delaying the rule, it still represents a significant step towards climate accountability.
The rule garnered immense public interest, with thousands of comments from various stakeholders. Additionally, West Virginia Attorney General Patrick Morrisey announced a legal challenge against the regulations, joined by a coalition of 10 states, citing concerns about federal agency overreach. The rule's success may hinge on the SEC's ability to justify its intentions as information disclosure rather than emission reduction mandates.