DECISION TIME — As the U.S. Securities and Exchange Commission moves to finalize its long-awaited climate-risk disclosure rule at a meeting in Washington tomorrow, it will be a late and potentially redundant arrival on a regulatory landscape that has dramatically shifted since the agency released its initial proposal two years ago. Many of the major companies that will be required to report on the financial impact of their carbon footprints under the SEC’s rule are already facing the prospect of having to deliver even more substantial information under laws enacted by California last year as well as European Union regulations and rules approved by the International Sustainability Standards Board. “Those are things which — they're out there, and so that's one of our obligations as an agency,” SEC Commissioner Mark Uyeda, a Republican, said at an event today. “Even though we do the proposal, we have these subsequent intervening developments that factor in to the economic analysis. And so those are things which I know our staff has been paying attention to and we'll see tomorrow how they're reflected." The SEC is set to be the odd regulator out: We’ve reported that the agency's requirements for greenhouse gas emission disclosures are likely to be rolled back significantly from its original proposal. Even so, there are still plenty of unknowns on key matters such as the timeline for implementation and the threshold for when companies would need to spell out the financial toll of individual extreme weather events and climate impacts. The interplay within the global disclosure landscape is beginning to come into view. An SEC rule without Scope 3 reporting requirements, for instance, would leave such disclosures to California laws that are currently under legal challenge. “If the regulations do exclude Scope 3, I think that there's no doubt that there will be even greater focus and attention on what happens with the litigation,” said Ben Golombek, executive vice president at the California Chamber of Commerce, which joined the U.S. Chamber and other business groups in suing to overturn the state's law. People on all sides of the issue are expecting to be disappointed by the SEC's final rule, even though the likely rollbacks would represent significant victories for groups like the U.S. Chamber of Commerce and American Farm Bureau Federation. Still, irrespective of the misgivings, the move to finalize the rule is an unmistakable signal of intent by the SEC that aligns it with other jurisdictions’ climate disclosure requirements. “This is part of a fundamental shift that we're seeing take place globally, which is about treating climate data with the same rigor as financial data, and with the same emphasis on auditability and liability,” said Matt Fisher, head of policy at Watershed, a company whose software helps other firms track, report and reduce emissions. “The important thing to understand is you've got to get high quality, science-based data, because it's in your 10-K, and informs disclosures on your wider business strategy. So for CEOs, CFOs and board members of U.S. public companies, climate disclosure takes on a new level of seriousness as a result of this rule." Tomorrow’s vote to finalize the rule is likely just the beginning of a battle set to take shape in the weeks and months ahead. Litigation almost certainly awaits the SEC, potentially from both business organizations and conservative attorneys general that opposed the rule from the start, and green groups that contend the agency isn’t doing enough to protect investors from climate risk. And Republicans in Congress are readying an effort to strike down the rule through a Congressional Review Act resolution, our Eleanor Mueller reports.
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