Wall Street's top regulatory body met on Wednesday to vote on whether to adopt rules that would force public companies to disclose certain climate-related risks, in first-of-its-kind regulation that was watered down after an earlier draft sparked two years of debate.
The U.S. Securities and Exchange Commission (SEC) aims to set a standard for how companies communicate with investors about greenhouse gas emissions, weather-related risks, and how they are preparing for the transition to a low-carbon economy.
SEC Chair Gary Gensler opened the meeting saying he expected companies and investors to benefit from the new rules that formalise a system that has allowed companies to produce climate related information on their own terms.
"Our vote today is on rules, not just guidance like we had in 2010 but on actual rules and ones that require disclosures," Gensler told an open meeting.
"Bringing them into such filings I think will help make them more reliable."
Companies and business groups sent thousands of comment letters in response to a draft proposed in 2022. Some of them raised the prospect of lawsuits alleging the requirements would be too expensive to meet and went beyond the SEC's mandate.
In its final version, the rule drops a proposal to ask larger companies to gather and report data on planet-warming emissions from suppliers and end-users of their products, known as Scope 3 emissions, in some circumstances. Reuters first reported this change last month.
In a further move away from the more prescriptive draft, it also allows those larger companies to determine whether emissions from their own operations and the power they purchase constitute information that investors need to make decisions.
The rules require an approving vote during the meeting from a majority of the five-member Commission to be adopted.
Despite the softening, Mark Uyeda, one of two Republicans on the Commission, said he was unable to support it.
"The Commission ventured outside of its lane and set a precedent for using its disclosure regime as a means for driving social change. If left unchecked, we may see further misuse of the Commission's rules for political and social issues and an erosion of the agency’s reputation as an independent financial regulator," he said in a statement.
Companies will be asked to add a note to their financial statements detailing costs stemming from severe weather events such as hurricanes and wildfires, but weakens a proposed requirement to disclose the split out the impact of those costs in a financial statement, focusing instead on specific costs, charges and losses.
Smaller firms - that comprise the majority of U.S companies - will be exempt from reporting their greenhouse gas emissions.
