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Mandating Disclosure of Climate-Related Financial Risk

Climate change presents grave risk across the U.S. economy, including to corporations, their investors, the markets in which they operate, and the American public at large. Unlike other financial risks, however, climate risk is not routinely disclosed to the public. This report, authored by Policy Integrity and the Environmental Defense Fund, urges the Securities and Exchange Commission to issue new, mandatory disclosure rules focused on climate risk.

The report also provides process-oriented recommendations for designing disclosure rules that will yield comparable, specific, and decision-useful information on climate risk. Specifically, the authors recommend:

  • drawing best practices from existing frameworks and standards
  • soliciting input from financial and climate experts, corporations, and investors through concept releases and/or a climate risk advisory committee
  • coordinating with other financial regulators and drawing on climate-related expertise at other federal agencies through interagency working groups
  • developing greater SEC expertise in this area by having the Division of Economic and Risk Analysis conduct economic research on climate risk.

Taken together, these actions will facilitate informed investing, sustainable growth, and a more resilient economy.