What the SEC climate disclosure rule may mean for investors

The Securities and Exchange Commission is poised to issue a final rule on Wednesday that would require companies to beef up disclosures around climate risks — a level of transparency that should help investors assess a company’s value in a warming world, said experts.

At a high level, the rule — initially proposed in March 2022 — would expand investors’ insight into the threat that climate change poses to publicly listed companies and how businesses contribute to a warming planet.

Climate disclosures would be made in annual filings companies make to the SEC, such as a Form 10-K, and in registration statements filed before an initial public offering.

“I think climate disclosures have largely become table stakes for the investment community,” said Lindsey Stewart, director of investment stewardship research at Morningstar.

Such data points are currently spotty.

Publicly listed U.S. companies make climate disclosures on a voluntary basis, and they remain “uncommon in all but a few sectors,” according to S&P Global.

Corporations will likely be required to disclose short- and long-term physical risks, such as the impacts of hurricanes, droughts, wildfires, extreme heat and sea level rise, Stewart said.

They’d also likely report “transition” risks from legal or regulatory changes, new technology and business practices that aim to adapt to a hotter world, he said.

Corporations would also be required to…