SEC Approves Scaled-Back Version of Emissions Reporting Rule

On Wednesday, the Securities and Exchange Commission (SEC) approved a scaled-back version of its controversial emissions reporting rule.

The Details: The rule, approved by the three Democrats and opposed by the two Republicans on the committee, requires that companies issue reports to investors on the environmental ramifications of their operations. The SEC, however, threw out plans to force disclosure of CO2 emissions from companies' supply chains and end users of their products. These indirect emissions are classified as Scope 3 emissions by the Environmental Protection Agency (EPA).

Key Quote: “These final rules build on past requirements by mandating material climate risk disclosures by public companies and in public offerings,” said SEC Chairman Gary Gensler. “The rules will provide investors with consistent, comparable, and decision-useful information, and issuers with clear reporting requirements.”

For Context: The rule links climate issues more deeply to U.S. financial oversight and offers new insight to investors about how companies assess risks. It also follows movements in California and the European Union, which have adopted corporate climate disclosure rules. The rule is expected to face legal challenges.

Support and Opposition: Many Democrats and environmental groups support the enhanced disclosures, but some feel the scaled-back rule does not go far enough. Many Republicans and business leaders feel the SEC has overextended its authority, and that the rule is an attempt to pressure companies to steer capital away from fossil fuels.