In a widely anticipated rule published March 21, the SEC is proposing to require listed companies to disclose climate-related financial risks and metrics to investors. The SEC believes that the information will help investors make decisions about how climate change may impact their investments because the information "can have an impact on public companies' financial performance … ."

The SEC's Enhancement and Standardization of Climate-Related Disclosures for Investors (33-11042) proposed rule notes that existing sustainability reports on company websites are not very good. And the boilerplate discussions in public filings drafted by corporate lawyers are worse, with inconsistent methodologies. Third-party rating agencies are not any help, because they often provide different scores to the same company and fail to use uniform criteria. The SEC says in the proposed rule release that "the current disclosure system is not eliciting consistent, comparable, and reliable information that enables investors to assess accurately the potential impacts of climate-related risks on the nature of a registrant's business and to gauge how a registrant's board and management are assessing and addressing those topics." Comments are due by May 20.

The release notes that the SEC has focused on tackling climate change since the 1970s, focusing on compliance with environmental laws, with the most recent disclosure guidance, which was put out in 2010, noting that climate change disclosures may be material to investors and identifying certain climate-related issues that companies may need to consider, including direct and indirect impacts of climate-related regulations, international agreements, and other business impacts. The new rule wades significantly deeper into this water and away from the "materiality" anchor of the 2010 release.