House and Senate Democrats introduced the latest version of a bill that would require public companies to disclose climate-related risks.
The proposed Climate Risk Disclosure Act of 2021, introduced Thursday by Sens. Chris Van Hollen of Maryland and Elizabeth Warren of Massachusetts, Rep. Sean Casten of Illinois and numerous co-sponsors, mirrors a proposal from previous sessions of Congress that did not advance.
The proposed law would mandate that the Securities and Exchange Commission to go beyond its current guidelines for companies to consider the effects of the climate crisis on company assets, and instead mandate that they disclose their exposure to climate-related risks to give investors more information.
If passed, the SEC would have two years to issues rules that require every public company to disclose direct and indirect greenhouse gas emissions, 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 greenhouse gas emissions are restricted, and risk management strategies related to the physical risks and transition risks posed by the climate crisis.
The bill directs the SEC to tailor disclosure requirements to different industries, with additional requirements for companies engaged in the commercial development of fossil fuels.
"Investors have a right to know what steps companies are taking to address these threats and what losses they may suffer as a result of inaction. This legislation will not only provide the transparency investors deserve but will also ultimately help incentivize corporations to step up in the fight against climate change," Mr. Van Hollen said in a release.
Current voluntary disclosure "is not meeting the urgency of the climate crisis," said Steven Rothstein, managing director for the Ceres Accelerator for Sustainable Capital Markets, in the statement.
"There's broad consensus that current disclosures are spotty and unreliable, and that the existing system is extremely inefficient for investors and companies, and the broader capital markets," Mr. Van Hollen said. "We simply don't have enough information to price climate risk."