Understanding the SEC’s Climate Risk Disclosure Rule

The Securities and Exchange Commission (SEC) recently proposed requirements for companies to disclose information about climate-related risks – such as drought, wildfires, or market shifts – that are likely to have an impact on their business, as well as climate goals or planning processes that the company has developed in response to climate risks. Companies would also report their greenhouse gas emissions.

INVESTORS ARE DEMANDING MORE RELIABLE CLIMATE RISK INFORMATION

How a company plans for and responds to climate risks affects financial performance[1] and investors are demanding clearer and more comprehensive information to make informed decisions. For example, over 4,000 investment firms managing over $120 trillion in assets support the United Nations-sponsored Principles for Responsible Investment. These signatories, including BlackRock, Vanguard, State Street, and other major US asset managers, commit to incorporating environmental, social, and governance (ESG) issues, including climate risk, into investment analysis and seeking disclosure from the companies in which they invest.