SEC to Vote on Contentious Climate Risk Disclosure Rules
The U.S. Securities and Exchange Commission (SEC) is set to vote on new climate risk disclosure rules this Wednesday. The proposed standards, first introduced last spring, have sparked significant opposition, with over 15,000 letters challenging the inclusion of Scope 3 reporting. This requirement could expose companies to potential legal challenges, leading some to believe the SEC may drop this provision.
Scope 3 emissions, which account for more than 70% of a firm's overall carbon footprint, would be disclosed under the new rules. These emissions result from a company's value chain, including investments, purchases, and sales. For the oil and gas industry, this could reach as high as 90%. The proposed rules aim to align U.S. stock markets with EU news standards and enhance the accuracy of climate indices by exposing investors to companies with lower carbon footprints.
The SEC's plans come amidst a backdrop of legal uncertainty. The U.S. Supreme Court has already curbed the U.S. Environmental Protection Agency's powers to restrict greenhouse gas emissions. This could potentially impact the SEC's ability to enforce these new disclosure requirements.
The SEC's vote on Wednesday will determine the fate of these contentious climate risk disclosure rules. If approved, the new standards could significantly impact U.S. corporations, particularly those in carbon-intensive industries. However, potential legal challenges and the SEC's recent track record may cast doubt on the final outcome.
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