Reporting requirements on climate change toughening up internationally

By Tom Ravlic

March 23, 2022

Commodity Futures Trading Commission Chair Gary Gensler
Commodity Futures Trading Commission chair Gary Gensler. (AP Photo/Evan Vucci)

One of the world’s most powerful corporate regulators, the Securities and Exchange Commission in the United States, has issued proposals for public comment that would, if enacted, force any company trading in the US market to disclose climate-related information.

The Securities and Exchange Commission is the American equivalent of the Australian Securities and Investments Commission, which is the Australian corporate cop; the proposal to toughen up disclosure regulation so that companies are forced to tell shareholders and other stakeholders more about their management of climate risks is in line with global trends.

An international, London-based body called the International Sustainability Standards Board has been established to create a new body of standards designed to expand the disclosures of listed companies worldwide beyond what is required for financial statements.

Australia and New Zealand are also in the process of bedding down reporting requirements through the relevant accounting and auditing authorities in both countries and, like the American regulator has indicated overnight, they are also using a disclosure framework known as the Task Force on Climate Related Disclosures.

The proposed rules would require companies and other entities to describe the impact of climate-related risks on their business, their strategies and the outlook for their enterprise.

Draft requirements, if made into a final rule by the SEC, would also require the companies to spell out how an entity manages climate-related risks, audited figures for greenhouse gas emissions, and metrics related to the management of emissions that need to appear in notes to the financial statements.

SEC chair Gary Gensler said that the proposed rules for disclosure are designed to meet the demands of investors who are interested in understanding more about how the entities in which they invest manage climate risks.

“Today, investors representing literally tens of trillions of dollars support climate-related disclosures because they recognise that climate risks can pose significant financial risks to companies, and investors need reliable information about climate risks to make informed investment decisions,” Gensler said.

“Today’s proposal would help issuers more efficiently and effectively disclose these risks and meet investor demand, as many issuers already seek to do. Companies and investors alike would benefit from the clear rules of the road proposed in this release.

“I believe the SEC has a role to play when there’s this level of demand for consistent and comparable information that may affect financial performance. Today’s proposal thus is driven by the needs of investors and issuers.”


US investors cool on Australia

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