The SEC has finally unveiled its long-awaited proposals for climate-related disclosures, in what could prove to be a seminal moment for the wider market as it rises to address the challenge of climate risks.

There is an anticipated draft rule under which companies would disclose their own direct and indirect greenhouse gas emissions, known as Scope 1 and Scope 2 emissions.

The SEC would also require companies to disclose greenhouse gases generated by suppliers and partners, known as Scope 3 emissions, if they are material or included in any emissions targets the company has set.

It would also require companies to disclose the “actual or likely material impacts” that climate-related risks will have on their business, strategy and outlook, including physical risks as well as possible new regulations such as a carbon tax.

Companies that have set emissions goals or announced other plans to transition away from fossil fuels would also have to provide details on how and when they expect to do so.

The SEC said the Scope 3 requirement would include carve-outs based on a company’s size, and that all the emissions disclosures would be phased in between 2023 and 2026.

It was unclear how many companies would have to make Scope 3 disclosures, given they would have discretion to decide what counts as “material.” While 35% of North American companies have set greenhouse gas targets, those plans do not include Scope 3 emissions, according to S&P Global data.

SEC chair Gary Gensler claimed the disclosure proposals will “provide investors with consistent, comparable, and decision-useful information for making their investment decisions, and it would provide consistent and clear reporting obligations for issuers”.

“Our core bargain from the 1930s is that investors get to decide which risks to take, as long as public companies provide full and fair disclosure and are truthful in those disclosures.”

He said the proposals would help issuers more efficiently and effectively disclose these risks and meet investor demand, as many issuers already seek to do:

“Companies and investors alike would benefit from the clear rules of the road proposed in this release. I believe the SEC has a role to play when there’s this level of demand for consistent and comparable information that may affect financial performance. Today’s proposal thus is driven by the needs of investors and issuers.”

However, the proposals have met with strident criticism from some quarters.

The US Chamber of Commerce called the proposal too prescriptive and complained it would force companies to disclose information that was largely immaterial at the expense of more meaningful data.

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