By Nathalie Voit

The U.S. Securities and Exchange Commission (SEC) formally proposed new rules on March 21 that would require public companies to disclose certain climate-related information to investors. The disclosures would include companies’ greenhouse gas emissions, reduction targets, and potential operational risks stemming from climate-related events.

If enacted, the landmark climate ruling would serve as a big win for President Joe Biden, who once called climate change the “number one issue facing humanity.” The new ruling would also mark a historic shift in the way policy-makers confront climate change.

Although existing regulations require companies to disclose “material information,” which in many cases includes climate risk, the new proposals would be the first to mandate detailed information on how financial firms, individual businesses, and corporations are dealing with such risks.

“Our core bargain from the 1930s is that investors get to decide which risks to take, as long as public companies provide full and fair disclosure and are truthful in those disclosures,” SEC Chair Gary Gensler said at a meeting on Monday. “That principle applies equally to our environmental-related disclosures.”

The proposed guidelines build on universal disclosure frameworks many companies already use to voluntarily report their emissions, such as the Task Force on Climate-Related Financial Disclosures and the Greenhouse Gas Protocol. However, the proposed rule is unique in that it would standardize common climate-related disclosure practices, which the agency says are currently “fragmented” and “inconsistent.”

The SEC also said it was responding to investor demand for more consistent and reliable climate-related information from businesses. The agency said many companies currently seek to provide this information to shareholders but cannot do so without a viable disclosure framework in place.

“The proposed rules would help issuers more efficiently and effectively disclose these risks, which would benefit both investors and issuers,” the SEC wrote.

The proposal, which passed 3-1 along party lines, will be open for 60 days for public comment.