July 22, 2019

Improving Climate Risk Disclosures from within the SEC: Moving Forward Absent the Climate Risk Disclosure Act of 2018

Keziah D. Groth-Tuft

While the recently introduced Climate Risk Disclosure Act of 2018 (2018 Act) by Senator Warren momentarily brought the issue of climate change’s effects on public companies’ financial predictions to the top of the newsreel, this topic is not new, and neither is the regulation it builds off of—an almost decade-old interpretation by the Securities Exchange Commission (SEC) that current securities laws require material risks posed by climate change to be disclosed. While the 2018 Act promises to add to this foundation by requiring uniform disclosure metrics, the bill introduced by eight democratic senators (four of whom are now presidential candidates) first must pass through both chambers of Congress, and then would have to survive a potential presidential veto. This article points to the forgotten path of SEC rulemaking. In light of the SEC’s 2016 Concept Release seeking stakeholders’ input on climate risk disclosure and two petitions for rulemaking filed with the SEC on the topic just since the 2018 Act was introduced, SEC rulemaking might be the most viable option for improving climate risk disclosure processes moving forward. 

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