Navigating Intent and Impact

As to be expected with any major addition to financial regulations, much has been said in response to the proposed SEC Climate Disclosure Rule. Advocates applaud the proposed disclosure requirements as a critical step forward in the standardization of climate-related disclosures. Meanwhile, critics have raised arguments about perceived agency overreach and compliance feasibility.

You may have heard the following in public debates or even from stakeholders within your organization:

• “The SEC is pushing a ‘tree hugger’ issue”
• “This rule is an example of ‘woke’ politics”
• “The SEC shouldn’t be acting as the EPA”

These characterizations misconstrue the intent behind the proposal, and the mission of the SEC itself. It is important to remember that the SEC is bound by a clear regulatory mission.

As Kristina points out:

‍“The SEC has a tripartite mission when considering any regulatory proposals: protecting investors, maintaining fair, orderly and efficient markets, and promoting capital formation.

The proposed climate disclosure rule is about investor protection. It’s about giving investors the information they need about the climate-related financial risks they face in a clear and consistent manner.”

In this module, we will examine how the proposed climate disclosure rule promises to advance the SEC’s core Investor Protection objective while also promoting Market Efficiency. This will provide a deeper understanding of the ‘why’ behind the rule.

Being able to share your understanding of the rule’s underlying objectives with internal and external stakeholders should make it easier to garner internal support for the new footprinting and disclosure activities ahead. It should also help you as you engage with investors, customers, employees, and other stakeholders.