The US Securities and Exchange Commission (SEC) has proposed new rules that could require companies to update investors annually on how much planet-heating pollution they are pumping out and how that pollution could ultimately affect their earnings.
A slew of companies from Apple to Amazon have pledged to become carbon neutral in the coming decades. Consistent updates on how much pollution they generate help ensure that climate pledges aren’t just greenwashing or making false promises, reports The Verge.
The proposed rules are also supposed to protect investors as companies cope with disasters linked to climate change, like more extreme weather.
“We are concerned that the existing disclosures of climate-related risks do not provide investors with the detailed and reliable climate-related information they need to make informed investments and voting decisions,” Renee Jones, director of the SEC’s Division of Corporation Finance, was quoted as saying during an SEC open meeting.
If the rules go into effect, public companies would need to share greenhouse gas emissions from their operations and electricity use, the report said.
The SEC also sought to hold some companies responsible for indirect emissions that come from their supply chains and consumers using their products, a more contentious disclosure.
Some companies have excluded these indirect emissions from climate pledges, arguing that this pollution is out of their control.
The SEC said that smaller companies will not have to disclose those indirect emissions, and larger companies only need to share the indirect emissions that are “material” or essential for investors’ understanding of a company’s financial situation — a murky distinction.
About one-third of companies already disclose at least some of their emissions or climate risks in annual reports, according to the SEC. But without federal standards for greenhouse gas emissions reporting, it’s difficult for investors to compare companies’ environmental impacts with each other.
The SEC also called on public companies to be more transparent about how they plan to reach their climate goals.