A bill that would require US public companies to disclose the risks climate change could pose to their business has passed a key vote in the House Financial Services Committee.
The Climate Risk Disclosure Act of 2019 would require the Securities and Exchange Commission (SEC) to develop and implement guidelines for companies on disclosing climate risks, which the regulator would be required to make public on its website.
Originally introduced in 2018, the legislation was recently reintroduced by Democratic Rep. Sean Casten of Illinois and Massachusetts Sen. Elizabeth Warren.
“Public corporations must take responsibility for the large financial risks posed by the impacts of climate change, while embracing the economic opportunity of being global leaders in developing a clean energy economy,” said Casten in a statement. “Our bill utilizes market mechanisms to incentivize climate action by ensuring that corporations disclose the risks posed by climate action to the benefit of their shareholders and the public.”
The proposed legislation would link disclosures to a scenario in which global temperatures are prevented from rising more than 1.5 degrees Celsius above pre-industrial levels. The bill would direct the SEC, in consultation with climate experts at other federal agencies, to issue rules within one year that require every public company to disclose:
- Direct and indirect greenhouse gas emissions
- The total amount of fossil-fuel related assets that it owns or manages
- How its valuation would be affected if climate change continues at its current pace or if policymakers successfully restrict greenhouse gas emissions to meet the 1.5 degree Celsius goal
- Risk management strategies related to the physical risks and transition risks posed by climate change
The proposed legislation would also direct the SEC to tailor the disclosure requirements to different industries, and to impose additional disclosure requirements on companies engaged in the commercial development of fossil fuels.
The backers of the bill cited a June report from Moody’s Analytics that said global economic damage related to climate change will be an estimated $54 trillion in 2100 under a warming scenario of 1.5 degrees Celsius, and $69 trillion under a warming scenario of 2 degrees Celsius. They say the bill will help the market appropriately assess the risk of climate change, which they believe will spur private actors and government actors to act more decisively to address the climate crisis and promote financial stability.
“It’s time to wake up and fight back against giant corporations that want to pollute our environment and ask taxpayers to clean up the mess,” said Warren in a statement.