By Douglas Gillison
(Reuters) - Wall Street's top regulator will vote on March 6 whether to adopt far-reaching changes to the way thousands of U.S.-listed companies tell investors how climate change will affect their bottom line, a landmark rule for the U.S. Securities and Exchange Commission.
The agency says such information is important for investors deciding whether to put their money into a company.
What is the five-member Commission considering?
REPORTING EMISSIONS
In its draft rule two years ago, the SEC proposed requiring companies to report greenhouse gas emissions in three categories, including Scope 1, which are emissions a company produces through its own operations, and Scope 2, emissions the company is responsible for from utilities use and power generation.
More contentiously, the SEC proposed that under some circumstances companies should also include Scope 3 emissions - those generated from a company's supply chain, such as transportation of goods, business travel and by customers' consumption of products and services.
Major lobby groups have pushed back hard on Scope 3, arguing it is excessively burdensome and unlikely to produce meaningful data. SEC officials have dropped it from the proposed regulation.
It has also softened the Scopes 1 and 2 disclosure requirements, which were initially mandatory. The draft rule now under consideration would compel such disclosures only if companies deem they are material, according to people familiar with the matter.
CLIMATE FINANCIAL IMPACTS
The original draft would also require companies to disclose in their financial statements when they take a hit of more than 1% from climate "impacts," such as damage from severe weather events or costs from de-carbonizing their operations.
This has also drawn intense fire from industry, with companies saying in comments submitted to the SEC that the policy is unworkable as proper accounting methods for such impacts do not yet exist and resulting data would not be meaningful.
Progressive and financial reform groups, however, have said such disclosures would be practicable and helpful.
DISCLOSING RISK
The proposal would also require companies to report a range of other risk-related information, such as how boards of directors manage climate risk, how those risks could affect companies' business, their business models, corporate strategies and business outlooks.
If companies have low-carbon transition plans or use scenarios to analyze climate-related risks, they would likewise have to describe these to investors.