The Securities and Exchange Commission (SEC) has implemented a new rule mandating large companies to disclose climate-related information, with the obligation set to commence in fiscal year 2025. This move responds to the growing recognition that climate risk is inherently tied to financial risk, providing investors with crucial insights into how companies address and manage climate-related challenges and opportunities. The required disclosures encompass details regarding the material impact of climate risks on business strategy, operations, and financial condition, as well as information on climate-related goals, transition plans, and costs associated with events like hurricanes and wildfires.

Despite the significance of this regulatory step, the final rule has drawn criticism for excluding the disclosure of ‘Scope 3′ greenhouse gas emissions, which play a crucial role in a company’s carbon footprint. Critics argue that this omission hampers investors’ ability to thoroughly assess and understand the full extent of climate risk. Nevertheless, proponents see the rule as a positive step toward enhancing transparency and empowering investors to make more informed decisions, aligning with the broader global trend of incorporating environmental considerations into financial disclosures.