SEC Chair Gensler spoke today about what he's asked the SEC Staff to consider as part of the proposed rulemaking process looking at mandating new climate-related disclosures for public companies and funds.
He made clear that he is motivated to act because "investors increasingly want to understand the climate risks of the companies whose stock they own or might buy." According to Chair Gensler, investors want consistent, comparable and decision-useful disclosures, citing that three out of every four of the 550 comment letters recently submitted to the SEC on this topic support mandatory climate disclosure rules.
With this in mind, Chair Genser has asked the Staff to develop a proposal by the end of the year. As part of the process, he has asked the Staff to consider a number of items, including: whether new disclosures should be included as part of the Form 10-K filed annually by a public company; whether a variety of qualitative and quantitative information should be provided by companies, such as how company leadership manages climate-related risks and emissions, impacts of climate change and progress towards goals; and whether metrics should vary given differing industries (such as banking, insurance, or transportation).
Chair Gensler also reiterated his view that investors should be able to "see what's under the hood" of funds marketed as "green" or "sustainable," In this regard, he has asked the Staff to consider whether fund managers should disclose the criteria and underlying data they use.
There are of course many, many other questions to be considered (and broad pushback on this effort by the Republican Commissioners and others). As a result, affected market participants will have to keep a close eye on this process and the turns it undoubtedly will take, including likely litigation at the very end of the process, aimed at challenging implementation of any proposed rulemaking.
When it comes to disclosure, investors have told us what they want. It’s now time for the Commission to take the baton.