U.S. firms may have to disclose emissions by partners, suppliers -SEC

Signage is seen at the headquarters of the U.S. Securities and Exchange Commission (SEC) in Washington, D.C., U.S., May 12, 2021. REUTERS/Andrew Kelly

WASHINGTON, July 28 (Reuters) - The top U.S. financial regulator said on Wednesday it may require publicly traded companies to report on greenhouse gas emissions by suppliers and partners, as part of an expected climate risk disclosure rule.

U.S. Securities and Exchange Commission (SEC) Chair Gary Gensler said the rule would likely be influenced by existing international standards but would be "appropriate" for American markets.

Gensler said he expects to propose the new rule by year end. The details are likely to spark consternation among U.S. issuers who have been pushing for a broad, principles-based climate risk disclosure regime rather than prescriptive demands.

Gensler told a conference the agency was considering both qualitative and quantitative information disclosures.

"Qualitative disclosures could answer key questions, such as how the company's leadership manages climate-related risks and opportunities and how these factors feed into the company’s strategy. Quantitative disclosures could include metrics related to greenhouse gas emissions, financial impacts of climate change, and progress towards climate-related goals."

The agency is also considering requiring companies to disclose the greenhouse gas emissions of other companies in their "value chain," such as suppliers and partners, Gensler added.

The SEC may require certain metrics specially for certain industries, and could require certain companies to provide analysis on how they might adapt to a range of possible climate change scenarios.

The nation's top markets watchdog is stepping up its environmental, social and governance (ESG) disclosure requirements as part of President Joe Biden's broader push to tackle climate change. Investors are also asking for more information on how climate change will affect businesses.

Business interests broadly agree more disclosures are needed, but they say flexible rules would generate more meaningful information.

They have also pushed for the SEC to align with voluntary standards outlined by the Financial Stability Board's Task Force on Climate-related Financial Disclosures.

While the agency would learn from those, it should "establish the appropriate. ..regime for our markets," Gensler said.

Reporting by Katanga Johnson in Washington, D.C. Editing by Michelle Price and David Gregorio

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Thomson Reuters

Washington-based reporter covering U.S. regulation at the Securities and Exchange Commission and the Consumer Financial Protection Bureau, previously in Ecuador, alumnus of Morehouse College and Northwestern University’s Medill School of Journalism.