Should Public Companies be Forced to Reveal Their Own Environmental Impacts?
Is the SEC Proposal Government Overreach?
The Securities and Exchange Commission announced yesterday a proposed rule change that would require public companies to include information about “climate-related risks that are reasonably likely to have a material impact on their business, results of operations, or financial condition, and certain climate-related financial statement metrics in a note to their audited financial statements.”
Rationalizing this, SEC chairman Gary Gensler wrote, “Today, investors representing literally tens of trillions of dollars support climate-related disclosures because they recognize that climate risks can pose significant financial risks to companies, and investors need reliable information about climate risks to make informed investment decisions. Today’s proposal would help issuers more efficiently and effectively disclose these risks and meet investor demand, as many issuers already seek to do.”
The proposal calls for companies to include information about:
1. Its approach to handling climate-related risks
2. Any identified climate-related risks that may impact its financial situation in the short-, medium- and long-term
3. How climate-related risks have affected or are likely to affect the company’s business
4. The impact that climate-related risks have had on the company
What’s more, it would require companies to disclose information about the greenhouse gas emissions that it produces directly or indirectly (e.g., by purchases from other companies that generate GHG).
A Form Too Far
While we all like clean air and water, this may be a case of what is commonly referred to as “government overreach.” To be sure, if a company is polluting and it is found out, odds are its stock will plummet and investors will be negatively affected (to say nothing of those who are affected by the waste).
But couldn’t one argue that it would be worth knowing the cholesterol levels and blood pressure readings to the executives in charge of public companies, too? After all, if a key executive has a health issue that puts them out of action, odds are the valuation of said company is going to take a tumble.
—Gary S. Vasilash