The Securities and Exchange Commission (SEC) has proposed new rules requiring manufacturers to disclose climate-related information in their financial statements. With the increasing importance of sustainability and environmental responsibility, these rules will significantly impact various industries.
In particular, the proposed regulations would require companies to significantly increase their reporting on climate risk, specifically on Scope 1 and Scope 2 emissions, which are emissions generated by a company’s operations. Perhaps most importantly, the rules would also require Scope 3 disclosures, which are upstream and downstream emissions along the company’s entire value chain.
This landmark legislation will reveal that many companies are more exposed to carbon emissions than many investors expect. Moreover, the outcome of the mandates could fundamentally reshape how the U.S. responds to a warming planet.
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