Why the US Securities and Exchange Commission climate disclosure rules will matter, and why they may not
- 24 May 2023 (15 min read)
Key points:
- The SEC’s decision to address climate-related risks is long overdue but it will be a positive step for both investors and those supportive of transitioning to a low-carbon economy
- When the final decision is announced, it will however have limitations
- Investors must continue pushing for companies to disclose material climate information necessary to make the best risk-adjusted investments
Another delay. After receiving a record 15,000-plus public comments, and more than 12 months of analysis, negotiations, and adjustments, the US Securities and Exchange Commission (SEC) did not release its final ruling in April 2023 as was expected. Without it, we still do not know what SEC-registered filers, both foreign and domestic, will be required to disclose regarding carbon emissions and climate data.
With all the leadup and debate around the potential requirements, the fundamental question is – when it eventually comes, will this ruling even change anything? We believe it does, at least partially.
Overall, the SEC’s decision to address climate-related risks is long overdue. When released, it will be a positive step for both investors and those supportive of transitioning to a low-carbon economy.
However, even when the final decision is announced, it will have obvious limitations related to the scope of the SEC’s regulatory authority, what emissions disclosure will be required, and potential delays in the implementation.
Because of these limitations, large investors, like AXA IM, must continue pushing for companies to disclose material climate information necessary to make the best risk-adjusted investments in a world transitioning toward a more sustainable, low-carbon economy.
(Additional contributions from AXA IM, Investment Grade Credit Research Analyst, Clotilde Queneudec)
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