Good morning. The CFO’s office plays a vital role in compliance with the U.S. Securities and Exchange Commission’s (SEC) mandate to standardize climate-risk disclosures. Under the rules, public companies are required to report climate risks that may have a material impact on business strategy, results of operation, or financial condition—for now at least. But under the incoming administration, many anticipate the SEC will rescind or decline to enforce these disclosure rules.
The current SEC Chair Gary Gensler, who introduced the climate disclosure mandates, will step down on Jan. 20. He is expected to be succeeded by President-elect Donald Trump's nominee, Paul Atkins, who is a veteran regulator with a libertarian outlet, Fortune reported.
For more insight, I talked with Kristina Wyatt, deputy general counsel and chief sustainability officer at Persefoni, a climate management and carbon reporting platform for enterprises. Wyatt was formerly senior counsel for climate and ESG at the SEC.
“I think it's probably more likely than not that the SEC will in some manner rescind the climate rules, potentially through the litigation process as part of the settlement,” she said. Atkins is “a very smart guy” and a “good person,” though his bent is more toward “concern about the cost to companies of regulation,” she said.
Several companies filed lawsuits against the SEC the day after the agency imposed its final climate disclosure rules in March. In response, the agency stayed the implementation of the rules. The SEC had previously received considerable pushback with more than 24,000 comment letters from companies leading up to this year's announcement of the final rules.
Although the SEC rules have been stayed and their fate is uncertain, Persefoni’s business continues to increase, Wyatt said.
“We're certainly seeing customers come in the door looking to be able to calculate their carbon emissions, and looking to be able to make disclosures related to their climate-related financial risks,” she said.
Even if there were no climate rules, companies are well aware that they need to consider the existing baseline SEC rules, like regulation S-X, which requires a public firm to disclose financial information, Wyatt explained. So if a company is spending a material amount of money on a climate-related issue, for example, they’d potentially need to report that.
Other reasons companies might not do an about-face when it comes to reporting on carbon emissions—customer, investor, and consumer demand, Wyatt said.
“Companies will come to us and say, ‘Well, we have some interest in calculating our emissions, but we really don't want to do anything until there's clear regulatory guidance in the form of SEC rules,” she explained. “And so many times, they end up coming back and they say, ‘Our biggest customer is asking us to report so that they can report.”
When the SEC adopted the final rules in March, it dropped the scope 3 reporting requirement—greenhouse gas emissions that are not produced by the company itself but among its value chain.
“But it hasn't gone away because there are other different regulatory bodies that are pushing for it,” Wyatt said.
Sheryl Estrada
sheryl.estrada@fortune.com
