By Douglas Gillison
(Reuters) -Wall Street's top regulator will vote on March 6 on whether to adopt rules requiring U.S.-listed companies to report climate-related risks, the agency said in a notice on Wednesday, in a potentially major overhaul of U.S. disclosure rules.
The Securities and Exchange Commission rules aim to standardize climate-related company disclosures about greenhouse gas emissions, risks and how much money they are spending on the transition to a low-carbon economy. The agency says that such information is important for investors.
Currently, US securities regulations do not impose common standards for climate-related disclosures. But the agency says that investors need such information to be consistent and comparable across the many companies increasingly producing climate information on their own terms.
First proposed two years ago, the rules are part of Democratic President Joe Biden's agenda to address climate change threats through federal agencies, and would join similar requirements in Europe and California.
Top Democratic lawmakers, reform advocates and environmental groups have urged the SEC to adopt "strong" rules requiring detailed disclosures of emissions, risks and capital spending.
"The information that it would require about a company's greenhouse gas emissions is critically important to investor decision-making," Washington advocacy group Better Markets recently wrote in a note urging the SEC to adopt the rules.
But the pending regulations have been bogged down by pushback from companies and Republican state officials who say they overreach the SEC's remit and will be burdensome for companies. They are expected to bring legal challenges once the rule is finalized.
While the SEC has not published a final draft, it has dropped its most ambitious "Scope 3" plank which would have required companies to disclose emissions from their supply chains, Reuters reported on Feb. 23. That change could help the rule withstand court challenges, sources said.
The SEC has also softened requirements for disclosures of Scopes 1 and 2 emissions - pollution categories for which companies are directly responsible, people familiar with the matter told Reuters.
The initial proposal made these disclosures mandatory. But the draft rule now under consideration would compel such disclosures only if companies deem they are material, meaning in some instances they might not be reported at all, the people said.
A spokesperson for the SEC said the agency would not comment on possible changes to regulations in development. "Based on the public feedback, the staff and the Commission consider possible adjustments to the proposals and whether it's appropriate to move forward to a final adoption," the spokesperson said.
The proposed regulations stand out for their scale and importance. They could prove to be the biggest overhaul of U.S. disclosure requirements in a generation, some securities law experts say. They have attracted more than 16,000 public comments, the most in the SEC's history, SEC Chair Gary Gensler has said. If the rules survive, they could prove to be Gensler's crowning legacy.
The SEC's five politically appointed commissioners will vote on whether to adopt the rules. Democratic Commissioner Caroline Crenshaw has defended the rules as originally drafted, according to a different source familiar with her thinking. However, Gensler, also a Democrat, generally only schedules votes he expects to win, suggesting he has Crenshaw's support.
Crenshaw's office did not respond to a request for comment.
Concerns over whether the rules could withstand a legal challenge were fueled by a 2022 Supreme Court decision curbing the Environmental Protection Agency's power to regulate emissions. Encouraged by a more conservative-leaning judiciary skeptical of regulatory overreach, business groups are also generally growing bolder about litigating agency rules.