The Feds Want Companies To Come Clean On Greenhouse Gas Emissions

By now it is clear that our climate system is changing and that human activity is a primary contributor through greenhouse gas emissions. Earlier this week, the U.S. Securities and Exchange Commission (SEC) proposed regulations that would force companies to come clean on greenhouse gas emissions. Here is a quick “101” on what you need to know.

First off, let’s explain what the SEC is - and there is no football or March Madness involved. The website states that its mission is, “To protect investors; maintain fair, orderly, and efficient markets; and facilitate capital formation. The SEC strives to promote a market environment that is worthy of the public's trust.” Since every investor is an inhabitant of Earth, these new regulations certainly seek to protect investors (and all of us) from the climate crisis.

White House National Climate Advisor Gina McCarthy tweeted Monday, “Today the SEC is making history. @SECGov is proposing the first-ever requirements for publicly traded companies to disclose their greenhouse gas (GHG) emissions and climate risks.” This goal was mentioned in a 2021 White House Fact Sheet as a way of, “Promoting the resilience of the U.S.financial system to climate-related financial risks.” According the the SEC press release, the new proposal would require registrants to disclose information related to (1) their governance of climate risks and risk management processes, (2) how business and financial statements have been or will be impacted by climate-related risks, (3) how their business outlook or strategy has been affected by identified risks, and (4) line-item impacts within financial statements of climate events and transition activities(including severe weather).

The proposed rules also require disclosure of direct and indirect emissions of greenhouse gases. The registrant would also have to account for downstream and upstream GHG emissions. The SEC press release noted that, “These proposals for GHG emissions disclosures would provide investors with decision-useful information to assess a registrant’s exposure to, and management of, climate-related risks, and in particular transition risks.”

Tracking and accounting for GHGs is emerging as an important activity within the public and private sector. Earlier this year, the Drawdown Georgia project unveiled its Greenhouse Gas Tracking Tool. It is an innovative tool designed to track GHG emissions across the state of Georgia, including at county level. The tool tracks emissions across five sectors: agricultural, commercial, industrial, residential, and transportation. Forests are also accounted for since they absorb carbon dioxide. Bill Drummond was the lead developer of the tool along with scholars at Georgia Tech and the University of Georgia. He makes an important point. Drummond, Director of the Master of Science degree in Geographic Information Science and Technology at Georgia Tech and an Associate Professor of City & Regional Planning, says, “You can’t manage what you can’t measure.”

I am sure there are critics of such efforts by the SEC and other organizations. There always are. I bet there were critics of Nixon era Clean Air Acts too. However, our air is cleaner now. It is well past time to be bold on climate-warming emissions too.