Published on Jan 10th, 2023 |

SEC Attempts to Add Climate Risk to the Regulatory Environment

Vigilant Insights

Brief Introduction

As part of the twenty-six new rules announced in the first eight months of 2022, the SEC proposed three rule amendments that could have significant impact on the industry if the amendments are able to make it through for approval.

Three Focuses of the Rule Amendments

Three Focuses of the Rule Amendments

  1. Public companies may be required to disclose green house gas emissions and other climate-related impacts as part of their disclosures. The SEC argues that the potential impact of climate change on the financial industry is a necessary component of whether a company can be considered profitable.
  2. Investment products that use labeling such as “green energy”, ESG (environmental, social, and governance), or “sustainable” would have to meet certain criteria to prevent misleading customers.
  3. Registration and periodic reports may require disclosures related to how climate change would affect their financial outcomes, and how risk management processes are attempting to mitigate this risk.

Vigilant's Final Conclusion

Vigilant’s Final Conclusion

The implementation timeline for these rule amendments is currently to be determined. There were a significant number of concerns submitted during the commenting period.

Additionally, there may be significant legal pushback that would require the SEC to defend these amendments in court. These amendments could cause a significant regulatory burden for the businesses they affect.

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