What the SEC vote on climate disclosures means for investors

cnbc.com:

The Securities and Exchange Commission on Wednesday voted 3-2 to issue a final rule that requires certain U.S. companies to disclose their risks related to climate change and how they contribute to a warming planet via greenhouse gas emissions.

The 886-page rule — which follows a March 2022 proposal — establishes a disclosure framework «floor» for publicly listed companies, transparency that will help inform investors' decisions, according to Caroline Crenshaw, an SEC commissioner who voted in favor of the rule.

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Climate disclosures aren't mandatory under the current regime; companies make them voluntarily. They remain «uncommon in all but a few sectors,» according to S&P Global.

The largest companies must start making some climate disclosures as early as fiscal 2025 and about greenhouse gas emissions as soon as fiscal 2026.

«Climate risk is financial risk,» Elizabeth Derbes, director of financial regulation and climate risk for the Natural Resources Defense Council, said in a written statement.

«This is a sensible rule to protect investors: it gives them access to clear, comparable, relevant information on the measures companies are taking to manage climate risks and opportunities,» Derbes said.

Overall, transparency around climate risk may be essential for investors to gauge if a company's stock is worth holding or if its stock price is reasonable, experts said — for example, is it too expensive given high exposure to climate risk, or perhaps fairly priced considering it's well positioned?

Required disclosures include climate risks that have had