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SEC Chair Gary Gensler Directs Staff to Prepare Climate Risk Disclosure Rule

Steven.Lofchie@cwt.com's picture
Commentary by Steven Lofchie

In remarks on a webinar sponsored by Principles for Responsible Investment, SEC Chair Gary Gensler reported that he directed SEC staff to develop a rule proposal on mandatory climate risk disclosure by the end of 2021. Principles for Responsible Investment is a UN-supported network of investors that promotes sustainable investment through the incorporation of environmental, social and governance factors.

Mr. Gensler outlined items he instructed staff to consider when drafting the mandatory rule, including:

  • whether such disclosures should be included in the Form 10-K;

  • how to disclose greenhouse gas emissions respective to the emissions from a company's operations, the company's use of electricity, and the emissions of other companies in an issuer's value chain;

  • whether there should be metrics for specific industries (e.g., banking, insurance and transportation);

  • whether a company should provide scenario analyses on its adaptation to physical and transition risks; and

  • whether a company that claims to be "net zero" should specify if it means net zero with respect to greenhouse gas emissions.

Mr. Gensler said that he asked staff to consider whether fund managers that label themselves as "green" or "sustainable" should disclose supporting criteria and data.

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