The U.S. Securities and Exchange Commission’s (SEC) Gary Gensler is aiming to have proposed rules in place for mandatory climate risk reporting by companies by the end of this year, according to a speech by the SEC Chair on Wednesday.
Speaking at the Principles for Responsible Investment’s “Climate and Global Financial Markets” webinar, Gensler said that mandatory rules would bring greater clarity to climate risk disclosures, with benefits including consistency and comparability of the information provided, and ensuring that investors are equipped with “decision-useful” levels of qualitative and quantitative data.
“Companies and investors alike would benefit from clear rules of the road. I believe the SEC should step in when there’s this level of demand for information relevant to investors’ decisions.
“Thus, I have asked SEC staff to develop a mandatory climate risk disclosure rule proposal for the Commission’s consideration by the end of the year.”
The SEC Chairs remarks come as the commission undergoes a re-examination of the role of sustainability disclosure in company reporting. In February, SEC Acting Chair Allison Herren Lee announced a review of the commission’s guidance for public company obligations for disclosures related to climate change risk, citing increased demand by investors for material, comprehensive and consistent information, including the extent to which such reporting should be mandatory for companies.
Gensler also cited investor demand as the key driver of the move towards revamped reporting rules, saying, “investors increasingly want to understand the climate risks of the companies whose stock they own or might buy.” According to the SEC Chair, the SEC received more than 550 responses to Herren Lee’s review, with roughly 75% supporting mandatory climate disclosure.
“The basic bargain is this: investors get to decide what risks they wish to take. Companies that are raising money from the public have an obligation to share information with investors on a regular basis.”