Investors in US stock markets will be keeping a close eye on the Securities and Exchange Commission (SEC) this Wednesday as it is due to vote on new rules that would require US listed companies to disclose their exposure to climate risks.
The rules were first put forward in Spring last year but sparked a backlash among corporations, with more than 15,000 letters being sent to the regulator and CEO’s for major corporations challenging the introduction of Scope 3 reporting standards.
But for many firms, Scope 3 emissions account for more than 70% of their overall carbon footprint, for the oil and gas industry, the share of Scope 3 emissions could be as high as 90%.
The introduction of Scope 3 reporting rules would have aligned US stock markets in line with EU standards, where Scope 3 reporting is now mandatory for all listed companies under the Corporate Sustainability Reporting Directive.
For investors, it could be an important driver to enhance the accuracy of Climate Indices offering exposure to companies with a lower carbon footprint.
While the final text of the climate disclosure rules has not yet been released, Reuters reported last week that the SEC is expected to drop the Scope 3 reporting requirement due to potential legal challenges.
In 2022, the US Supreme Court already curbed the US Environment Protection Agency’s powers to restrict greenhouse gas emissions from power plants.
On the other hand, the US state of California has already gone beyond the SEC requirements with Scope 1, 2 and 3 emissions reporting rules having been put in place at the end of last year.
