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As our understanding of the impacts of our planet’s changing climate has evolved, it has become obvious that climate change is not merely a moral or environmental challenge, but also a financial one. The enormous planet-wide environmental changes caused by humanity’s emission of greenhouse gases,
coupled with the efforts of individuals and groups to mitigate or reverse those changes, pose significant risks and opportunities for all for-profit corporations. Collectively, these climate risks materially impact individual corporation’s financial performance, undermine the stability of financial markets, and destabilize the entire economic system of the United States.
The federal securities laws and current SEC rules mandate that corporations must disclose information concerning these risks to investors. However, the current state of climate risk disclosure reveals that many corporations are failing to do so—in its 2020 status report, TCFD has noted that although support for its disclosure framework has grown dramatically, full adoption of the TCFD recommendations remains low.
The SEC's mission statement is to “protect investors; maintain fair, orderly, and efficient markets; and facilitate the formation of capital.” This mission can only be achieved if the Commission takes bold and immediate steps to ensure the adequate disclosure of climate change and other environmental, social, and governance risks.
In response to the Commission’s March 15, 2021 Request for Public Input on Climate Disclosures, ClientEarth US offers seven key recommendations for ensuring adequate and enforceable climate disclosures.
These proposals aim to achieve three primary goals. First, they will improve the quality of information provided by corporations to investors, enabling them to make more informed investment decisions consistent with their values. Second, these changes promote international reporting consistency, thereby easing the compliance burden of corporations, increasing the predictability of regulatory impact, and promoting more efficient capital flows between markets. Finally, they ensure that any new rulemaking is enforceable, in SEC enforcement proceedings, by independent third-parties, and through private securities litigation.