SEC Announces Proposal to Mandate Disclosure of Climate-Related Financial Risks from Publicly Traded Companies

(Washington, D.C. – March 18, 2022) The U.S. Securities and Exchange Commission (SEC) today announced a proposal that would require publicly traded companies to disclose their risks from climate change – a long overdue step that would help ensure investors have the relevant information they need to make prudent financial decisions.

“Climate-related financial risks are already significant and growing every day. In the last two years alone, the United States has suffered from more than 40 weather and climate disasters that each caused at least one billion dollars in economic damages,” said Michael Panfil, EDF Director of Climate Risk Strategies. “Investors need to understand the size and scope of climate risk, and today’s proposal is a welcome step toward that goal.”

The SEC has the clear and explicit authority to ensure publicly traded companies disclose financial risks. Today’s proposal is designed to help fulfill this objective and aims to equip investors with relevant climate risk information necessary to make sound investment decisions – an outcome made more urgent in light of the U.S. Financial Stability Oversight Council’s recent report that found “climate change is an emerging threat to the financial stability of the United States.” Other countries, from the United Kingdom to New Zealand to Japan, have already taken concrete steps to require that the mounting harms of climate change to their financial systems are proactively identified and understood. In contrast, the U.S. has until now relied on voluntary disclosure guidelines that have resulted in insufficient disclosures.

Investors, asset managers, and many companies that would be subject to reporting requirements have been telling the SEC to mandate climate risk disclosures. Ninety-three percent of institutional investors believe that climate-related financial risk “has yet to be priced in by all the key financial markets globally.” BlackRock, the world’s largest asset manager, has called for strong, mandatory climate disclosure rules to improve their ability to prudently manage investments. Large American businesses from Apple to Walmart to FedEx have expressed support for the SEC’s plans to mandate climate risk disclosure. EDF and other organizations also submitted comments supporting climate disclosure requirements to the SEC last June.

“The U.S. financial system is healthiest when investors are able to have all relevant data and make informed decisions on the basis of that available information,” said Panfil. “Today’s SEC proposal is a good step toward achieving a more efficient market and stronger economy. It should be swiftly finalized.”