Dive Brief:

• Climate risk disclosure rules now being written by the Securities and Exchange Commission (SEC) should vary based on a company's capitalization, revenue or similar metric, according to 89% of 436 companies surveyed by the U.S. Chamber of Commerce.

• Seventy-four percent of companies support a gradual phase-in of mandatory climate disclosure rules, and 47% oppose a requirement that the CFO, CEO or other corporate officer certify the reports, according to the survey.

• “Promulgating rules that provide for effective disclosure without overburdening public companies and their shareholders will be an enormously difficult task for the SEC,” according to a report on the survey by the chamber’s Center for Capital Markets Competitiveness.

Dive Insight:

SEC Chair Gary Gensler said on July 28 that the agency plans, by the end of 2021, to consider mandatory climate risk disclosure rules that may require companies to describe direct and indirect carbon emissions, including those by suppliers and partners in its “value chain.”

Companies may need to disclose both qualitative and quantitative details, including how they manage climate-related risks and opportunities day-to-day operations and in broad strategy, Gensler said. They may also need to report on metrics such as greenhouse gas emissions, financial impacts of climate change and progress towards climate-related goals.

“Investors increasingly want to understand the climate risks of the companies whose stock they own or might buy,” Gensler said. “Investors are looking for consistent, comparable, and decision-useful disclosures so they can put their money in companies that fit their needs.”

The chamber’s survey suggests that many companies would favor greater clarity on both disclosure standards and the definition for environmental, social and governance (ESG) principles.

Sixty-one percent said ESG “is a subjective term that applies to different companies in different ways,” the chamber said.

Half of survey respondents believe the standards set by various organizations for reporting on climate change and ESG are difficult to understand, address immaterial information and lack transparency. “Many companies have a negative view of standard setters for climate change and ESG,” the chamber said.

Eighty-two percent of companies agreed with the statement that “companies should be afforded the flexibility to determine how ESG issues apply to them and what material information they should be required to disclose."

Eight-four percent of companies believe the SEC should tailor climate change disclosure rules to various industries. SEC staff will consider whether to mandate distinct metrics for specific industries, such as banking, insurance or transportation, Gensler said.

Many companies have stepped up their reporting on climate change risk, with 59% expanding such reporting since 2010, the chamber said.

More than three out of five (63%) of companies communicate with shareholders on climate risk and 46% provide reports with greater detail in response to shareholder concerns.

The stakes of disclosure are rising for publicly-traded companies as both institutional and retail investment surges into assets tied to environmental, social and governance (ESG) principles.

Sustainability-related financing has tripled since 2015, with a tenfold increase in flows to ESG funds, an eight-fold increase in sustainable debt issuance and a doubling in the value of ESG-related deals by private equity and venture capital firms, according to a report by Generation Investment Management.

“The wide spectrum of public company opinions on these issues show why the SEC must proceed cautiously and include the input of those who will be most affected by new regulations,” the chamber said.