STMP members disappointed with reported draft of climate financial risk disclosure rule


MARCH 5, 2024

Media Contact: Jackie Fielder, jackie@stopthemoneypipeline.com


As financial risks from climate grow, SEC fails to ensure transparency in corporate reporting

WASHINGTON, DC — Today, in a last ditch effort, 79 organizations of the Stop the Money Pipeline coalition sent a letter to Chair Gary Gensler and other commissioners of the Securities and Exchange Commission (SEC) asking them to require companies to disclose Scopes 1, 2, and 3 emissions in their climate financial risk disclosure rule. The SEC will vote on the rule on Wednesday. Reports from last week indicate that the rule falls significantly short of the necessary measures to address the financial risks posed by climate change and lets the most polluting corporations and Wall Street financial institutions off the hook. Partisan political pressure by self-serving politicians and litigation threats from corporate lobbyists caused the SEC to weaken the rule. If passed, the SEC would abandon the most vulnerable investors – working people saving for retirement.

The rule’s reported notable omissions, particularly the lack of requirement for companies to disclose Scope 3 emissions, present a stark deficiency. Scope 3 emissions, which account for the majority of a company’s carbon footprint through its supply chain, are critical to understanding the full extent of a corporation’s impact on climate financial risk, and have reportedly been left out of the final draft of the rule. As well, Scope 1 and 2 emissions may reportedly only be voluntarily disclosed based solely on their materiality assessment, further diluting accountability for corporations. This discretion leaves investors in the dark about the true climate financial risks associated with their investments.

The urgency of the climate crisis necessitates strong and decisive action. We are witnessing the tangible impacts of climate change through the insurance crisis, where homeowners face unprecedented premiums and coverage denials. This crisis is a harbinger of the broader financial instability posed by unchecked climate risks. Furthermore, the Inflation Reduction Act’s (IRA) potential is significantly hampered by the absence of robust climate risk disclosures, which are essential for mobilizing capital towards sustainable investments.

This watered-down rule on climate risk disclosure is a departure from international norms and best practices. As regulators around the globe, including those in China and the European Union, advance their regulatory frameworks to include rigorous climate risk disclosures, the SEC’s proposed rule lags, jeopardizing the United States’ position in the global market.

The SEC’s reported rule is a step backward in effort to mitigate climate-related financial risks for the protection of investors. It is imperative that the SEC revises its rule to align with the recommendations outlined in the coalition letter: mandatory disclosure of Scope 3 emissions, removal of materiality assessments for Scope 1 and 2 emissions, and the requirement for companies to quantify the financial impacts of climate risks.


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