What the SEC vote on climate disclosures means for investors

Climate disclosures aren’t mandatory under the current regime; companies make them voluntarily. They remain “uncommon in all but a few sectors,” according to S&P Global.

The largest companies must start making some climate disclosures as early as fiscal 2025 and about greenhouse gas emissions as soon as fiscal 2026.

“Climate risk is financial risk,” Elizabeth Derbes, director of financial regulation and climate risk for the Natural Resources Defense Council, said in a written statement.

“This is a sensible rule to protect investors: it gives them access to clear, comparable, relevant information on the measures companies are taking to manage climate risks and opportunities,” Derbes said.

Overall, transparency around climate risk may be essential for investors to gauge if a company’s stock is worth holding or if its stock price is reasonable, experts said — for example, is it too expensive given high exposure to climate risk, or perhaps fairly priced considering it’s well positioned?

Required disclosures include climate risks that have had — or are reasonably likely to have — a material impact on company business strategy, operations or financial condition, according to the SEC.

They also include a company’s climate-related goals, transition plans, and costs and losses related to events like hurricanes, tornadoes, flooding, drought, wildfires, extreme temperatures and sea-level rise, the SEC said.

“Investors want to be able to accurately price those risks and opportunities as they look medium and longer term at their investments,” especially retirement investors who may have a timeline decades in the future, Rachel Curley, director of policy and programs at the U.S. Sustainable Investment Forum, recently told CNBC.

However, the rule is watered…