House Financial Services Committee Approves Climate Risk Disclosure Act

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The House Financial Services Committee has approved the Climate Risk Disclosure Act of 2021. The bill now heads to the House floor.

The Climate Risk Disclosure Act directs the SEC, in consultation with climate experts at other federal agencies, to issue rules within two years that require every public company to disclose:

  • Its direct and indirect greenhouse gas emissions;
  • The 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 policymakers successfully restrict greenhouse gas emissions to meet the 1.5 degrees Celsius goal; and
  • Its risk management strategies related to the physical risks and transition risks posed by the climate crisis.

The bill directs the SEC to tailor these disclosure requirements to different industries and to impose additional disclosure requirements on companies engaged in the commercial development of fossil fuels.

If the SEC does nor issue the required rules during the two-year period, public companies will be in compliance if they provide disclosure in their annual report that satisfy the recommendations of the Task Force on Climate-related Financial Disclosures of the Financial Stability Board as reported in June, 2017, or any successor report, and as supplemented or adjusted by such rules, guidance, or other comments from the SEC.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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