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SEC proposes climate disclosure rules as Gensler broadens market oversight

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Gary Gensler, the chairman of U.S. Securities and Exchange Commission, (SEC), was present at the SEC headquarters in Washington, D.C., U.S.A, U.S.A on Thursday, 7/22/2021.

Melissa Lyttle | Bloomberg | Getty Images

Monday’s announcement by the Securities and Exchange Commission was a major step towards requiring publicly traded companies that are listed to be more transparent about their carbon emission and climate impacts.

SEC the new rule — approved by a 3-1 margin — would compel companies to disclose how climate risks affect their business, outline their own greenhouse gas emissions and report on climate-related targets and goals.

Following the SEC meeting on Monday, the Chair addressed reporters in a briefing. Gary GenslerThe proposed rules will not only protect investors but also address a flood of questions about carbon emissions from corporations.

He said that “I think the SEC does have a role when investor demand is high” and that future risk often impacts how traders view an investment.

Gensler said that today’s investors make their decisions on the company’s future cash generation potential. Investors are motivated to research the potential impact of climate change on company future earnings before they trade.

Specific rules were laid out by the SEC, including an obligation for companies to provide information on how climate risk has had or is likely to have a material impact on their business over both short- and long-term. One would require companies using internal carbon pricing information to explain how they are established.

Others rules will measure and display large companies’ greenhouse gas emissions and indirect emissions from downstream and upstream business partners.

This suite of rules will now be open to public comment for 60 days. Investors, businesses and all other participants in the market can make comments and suggest modifications.

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Companies would be able to make the transitions from annual financial reports into the future if the rules were approved. according to a fact sheetThe regulator. The regulator would give the longest phase-in time to companies that have shares worth more than $700,000,000 on the public markets. They would also be expected to submit climate-related information to the SEC by fiscal year 2023.

Gensler indicated that he anticipates Gensler to respond to investors and legislators alike with an ambitious set of rules. This proposal is often seen by many as a means to kickstart the Biden Administration’s environmental policy agenda.

All of the responses are not likely to be positive. Some businesses could bring formal legal challenges, which would slow down the rules.

Jay Clayton, the former chairman of SEC is one key critic to this latest regulator move. He questioned whether the SEC’s latest move was too broad for the SEC which, as Congress has charged it, is capable of protecting investors and encouraging capital formation within the U.S.

Clayton said in an op-ed published by Wall Street Journal that the “setting climate policy” is the task of the lawmakers and not the SEC.

“Taking a new, activist approach to climate policy — an area far outside the SEC’s authority, jurisdiction and expertise — will deservedly draw legal challenges,” he added.

Gensler, however, told CNBC Monday that there are no new climate disclosure regulations. Apple and Microsoft are two of the world’s most important companies. They report large amounts of data on climate and actively work to reduce carbon emissions.

There are hundreds, perhaps thousands, of disclosures already made by companies. But those disclosures have been fragmented. Gensler stated that they are sort of different and follow different standards. Gensler stated that “We can bring some standardization to the table: A little consistency and some comparability.”

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