Last week, the U.S. Securities and Exchange Commission proposed a set of sweeping new rules requiring public companies to disclose climate-related risks in their registration statements and periodic reports. Under the proposed rules, public companies would have to disclose the actual and potential impacts of climate change on their business, management and governance processes to address those impacts, and their direct and indirect greenhouse gas emission levels. According to the SEC Chair Gary Gensler, the proposed rules, which were approved by a 3-1 margin, were driven by investor demand and concern that climate change poses significant financial risks to companies. While many companies already gather and report climate-related information, the proposed rules seek to standardize this information so that companies can effectively and efficiently make these disclosures and investors have consistent and comparable information to make informed investment decisions. Should they be enacted, they will have an outsized impact on the preparation of corporate disclosures, and could serve as the basis for future enforcement actions and, potentially, private litigation for alleged failure to comply.
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