The US Securities and Exchange Commission (SEC) has voted to pass new rules to enhance and standardize climate-related disclosures by public companies and in public offerings, as reported by the Financial Times on March 7. The long-awaited regulation marks the first nationwide climate disclosure rule in the US, although it removed some radical requirements included in an initial proposal two years ago. Under the final rules, large public firms must include their direct emissions (scope 1) and those derived from energy purchased (scope 2) in their annual reports from 2026, while the initial proposal mandated disclosure of scope 1, scope 2, and certain value chain emissions (scope 3) for all listed companies. The narrowed scope means around 60% of domestic public companies will be exempted from the new disclosure rules.

Other key provisions outlined in the new rules include requiring large listed entities to disclose short- and long-term physical climate risks to their assets, such as potential exposure to hurricanes and droughts. They will also need to reveal any spending related to their climate goals, such as purchases of carbon offsets or renewable energy credits. However, opponents including the US Chamber of Commerce and some congressional Republicans view the disclosure rules as regulatory overreach, potentially harming the US economy. Theyalso alleged potential violations of the First Amendmentby forcing businesses to carry out initiatives and disclose information that they might not want to. So far, a coalition of ten Republican states has filed lawsuits to block the new rules.

Sources:

https://www.ft.com/content/8ba7ca8b-6ffa-4b19-b2bb-8acfd7dd83eb

https://www.sec.gov/news/press-release/2024-31

Republican States Launch Lawsuit to Block New SEC Climate Disclosure Rules

https://www.theguardian.com/business/2024/mar/06/us-sec-climate-change-emissions-disclosure