Understanding the SEC’s Proposed Climate Disclosure Rules

The Securities and Exchange Commission (SEC) have finally unveiled their plans for climate-related disclosures. The rules may create more transparency for investors and help narrow the disclosure gap between the U.S. and other developed markets.

The Securities and Exchange Commission (SEC) ended any mystery of whether it would drop a proposed requirement that U.S.-listed companies disclose emissions from their value chain when it finalized its long-awaited climate-disclosure rules. Read the latest from Linda-Eling Lee, Head of the MSCI Sustainability Institute, on this development.

While the SEC has yet to finalize its proposed rules that would require companies to publish their greenhouse gas emissions and climate-change risk annually, the number of companies reporting such information has grown.

The SEC’s climate-disclosure proposal also may affect U.S.-listed GPs’ portfolios. In reality, the rule may represent the camel’s nose under the tent as the SEC indirectly brings climate transparency to some private companies.

MSCI supports the efforts of the Commission to require companies to report certain climate related disclosures. Read here our public comment on The Enhancement and Standardization of Climate-Related Disclosures for Investors.

As the final part of a series that analyzes the SEC’s proposal and its potential implications for companies and investors, this blog post focuses on target disclosures and the U.S. firms’ level of preparedness.

Adding Scope 3 to mandatory reporting as for Scope 1 and 2 emissions or introducing a uniform materiality threshold would provide a far more comprehensive picture of a company’s total emissions exposure. Irrespective of which approach is ultimately adopted, companies will face a much higher bar for climate-change disclosure.

Investors now face the challenge of making sense of how various jurisdictions will implement their versions of the TCFD’s standards. To help, we assessed the existing and proposed national TCFD frameworks on their comprehensiveness, consistency and stringency. We also assessed how closely each follows the TCFD’s blueprint.

A note from Linda-Eling Lee, MSCI Global Head of ESG and Climate Research, on the SEC’s proposed rules and the potential implications for investors and companies.

Hear from Linda-Eling Lee, MSCI Global Head of ESG and Climate Research, on what the SEC's proposed climate rules may mean for the climate-targets of both investors and companies.

To help understand whether companies are prepared to meet these proposed disclosure requirements, we assessed emission-disclosure rates of the MSCI USA Investable Market Index.