Monday was the release of a statement by The Securities and Exchange Commission. proposal for new rulesCompanies would be required to declare their risk related to climate change as well as their greenhouse gas emission. While it may take some time for the law to pass, the potential consequences will be huge.

Standardization in climate disclosure will create its own sector of professionals and technology solutions that track, validate and report these risks. Companies who already disclose their emissions data and track them voluntarily could have an edge over others.

Investors, customers and all other stakeholders will have more information about the SEC’s climate rules. This data will be used to create a case for better alternatives. Investors and customers may move their funds to better options, and climate laggards might lose out.

The SEC’s climate rule will be beneficial to companies that are clean-energy users and emit relatively little carbon dioxide. Companies with high carbon emissions, however, will “lose out” over time. Claire HealyDirector of Washington DC’s independent think tank on climate change, E3GCNBC.

Companies that have irresponsible emissions or other climate impacts can be pushed against by shareholders, customers and other stakeholders. Reena AggarwalGeorgetown University Professor of Finance,

Aggarwal explained to CNBC that there is precedent in the past for investors being able to get clear information, allowing them divest companies not meeting certain ethical standards.

Student protests, for example, helped universities divest from fossil fuel investments. Additionally, pension funds and sovereign wealth fund, such as CalPERS in CaliforniaTobacco stocks were sold.

Aggarwal stated that even though there might be a short-term hit to returns, long-term, the risk is reduced by doing so.

However, the SEC’s climate data won’t be the sole piece of a company’s sustainability story.

Healy said that “the SEC proposed rule” is another quiver in the bow designed to alter the calculations of investors and accelerate decarbonization. This is clearly combined with other factors that can influence investment decisions such as tightening government policies, explicit/implicit carbon pricing and risk of asset-stranding. Shareholder pressure, social licence to operate, retention.

Most investors are aware that manufacturing, chemicals industrial, cement and pulp and paper all require high levels of energy. said Brandon OwensVice president, Sustainability of the business consultancy firm Insight Sourcing Group.

Owens said to CNBC, “I don’t believe there would be an expectation suddenly they’re able decarbonize.” We want transparency. You can make compromises. “We want to see a plan for starting to reduce our carbon footprint.”

Help will be needed by companies to determine how to report and track their climate risks. Expertise in this area will make it hard for companies to find consultants and auditors. This includes many of the big names in management consulting and insurance. Rich SorkinCo-founder and CEO of JupiterA company that analyzes climate risks.

Companies with the ability to automate their carbon reporting and accounting processes will be successful.

According to the industry, “You will have success that is Salesforce-like.” Kentaro KawamoriCEO at PersefoniSoftware platform to assist companies in analyzing, managing, and reporting their carbon footprint.

“Just like Salesforce created the system of record for the customer record, companies like us — you will have one or two big winners — will create a system of record for the carbon accounting piece,” Kawamori said.

Financial services firms will certainly use data analytics and artificial intelligence in carbon accounting just as they have in financial accounting. However, Aggarwal said to CNBC that there is still a place for humans.

The proposal does require companies to monitor emissions in the scope-three range.if materialThe SEC stated that it was “severely” affected. Scope 3 emissions refer to indirect emissions from companies’ supply chains. They can be difficult to trace reliably.

This can prove to be especially challenging for businesses with international supply chains that are complex, says the report. Joe Schloesser, senior director at ISNThis service helps businesses monitor and vet suppliers and contractors to ensure they are meeting various standards, including ESG (environmental social governance).

He stated that industries with complex supply chains (especially those that rely on foreign providers for apparel, pharma and manufacturing) will be faced more difficulties in the near term. They may have to restructure their supply chains or turn over manufacturing work to local providers.

Schoesser states that domestic suppliers tend to be easier to track and will result in lower emissions when transporting components.

ESG funds have been a rapidly growing sector: At the end of December 2021, sustainable fund assets in the world increased by 9.9% to $2.74 Trillion. January report from Morningstar Direct.

Investors will be more likely to make climate-conscious investment decisions if the SEC climate rule is in place. It will allow them to compare emissions between companies across industries.

Bryan McGannon (director of policy, The), said that having a standardised framework to report this information has the advantage of providing clear, comparable, reliable data. The Forum for Sustainable and Responsible InvestmentCNBC.

McGannon explained that this allows investors to make “apples-to-apples comparisons”.

Aggarwal said that such information might reduce the “greenwashing” in ESG fund funds.

Kawamori stated to CNBC that the whole definition of sustainability or climate funds was going to be reworked very quickly. “I think there’s going to be a lot of losers,” Kawamori said.

Kawamori stated that ESG funds who have been actively investing in monitoring and understanding the emissions data of their constituent companies, including large funds, will also be better off, on the other hand.