The rule, which is expected to be challenged legally, aims to respond to investor demands to standardize reporting of climate-related risks and the corporate response, according to backers like US Securities and Exchange Commission Chair Gary Gensler.
The rule requires reporting of Scope 1 and Scope 2 emissions -- which cover direct emissions and those for energy purchased to run operations -- when those emissions are "material," or significant.
An earlier version of the rule also covered Scope 3 emissions -- which account for indirect emissions, as when customers use them -- but that provision was dropped as the proposal moved through the regulatory process.
At a public meeting Wednesday, Gensler said the proposal had sparked some 24,000 public comments following an initial release in March 2022.
The measure also requires companies to disclose: the potential climate-related risks on corporate strategy; a detailed accounting of steps taken to mitigate climate risk; oversight of climate risk by the company board; and information about climate-related targets or goals.
During a public meeting, SEC Commissioner Caroline Crenshaw, who joined the 3-2 majority in approving the measure, rued the decision to leave out Scope 3 emissions, which are considered a large and important part of a company's climate footprint.
But the SEC's two Republican commissioners described the measure that passed as still overly burdensome and confusing to investors.
"Not one dime spent by companies on compliance will go to actual emission reductions," said SEC Commissioner Mark Uyeda. "And shareholders will be paying for it."
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