Orange skies in San Francisco, during the California wildfires of summer 2020
The recent Supreme Court ruling, West Virginia vs. EPA, imposes unprecedented restraints on urgent efforts to slow climate change, conserve nature and address this century’s other global sustainability challenges. Nevertheless, I remain encouraged by the voluntary progress made by businesses and regulators like the SEC, which recently proposed a new rule that would mandate corporate climate-related risk disclosures. This SEC rule will help U.S. companies remain competitive globally, level the playing field for investors and ultimately help address the climate crisis by pushing companies to enhance their emissions reporting and better consider physical and transition risks.
Global markets and the world’s largest corporations have an outsized impact in driving the decisions that affect nature, biodiversity and the climate. That’s why, for the past 30 years, World Wildlife Fund (WWF) and other conservation groups have been helping companies set targets, transform supply chains, develop responsible sourcing policies and industry standards, identify and mitigate sourcing risks, share best practices and reduce the private sector’s environmental footprint.
Now more than ever, business leaders recognize the need for bold action. By 2020, 60 percent of Fortune 500 companies had already set a climate or energy-related commitment, a 12 percent increase over 2017. Science-based target setting has also grown significantly, with 63 Fortune 500 companies (13 percent) having set targets approved by the Science Based Targets initiative (SBTi), six times the number of companies that had done so in 2017.
Nevertheless, we need to keep pushing. We know how the twin crises of nature loss and climate change can damage nature and economies. In 2021, climate-related disasters in the U.S. alone totaled nearly $100 billion. Today, over half of the world’s gross domestic product (GDP) is at moderate or severe risk due to nature loss.
At the same time, efforts to fulfill the Paris Climate Agreement could unlock climate-related investments worth nearly $23 trillion by 2030 in sectors like renewable energy, energy efficiency and low-carbon technology A recent report by the Global Commission on Adaptation concludes that investments in adaptation can generate significant economic returns—many times more than their costs.
This is where the proposed SEC rule comes in. Companies generally prefer less regulation rather than more, but today’s voluntary patchwork of frameworks and standards for corporate climate-related risk disclosures is a mess for investors as well as the businesses they are analyzing. The proposed SEC rule would help address this by creating uniform sustainability frameworks and standards for consistent and comparable reporting, thereby reducing uncertainty and establishing a more level playing field. I have heard firsthand from many companies that this rule will improve their business prospects over the long-term and allow U.S. companies to better compete with global companies that are either ahead of the U.S. in terms of their voluntary disclosures or, inversely, are operating in jurisdictions where little or no voluntary or mandatory standards exist.
There is also overwhelming public support for this rule. According to a recent poll, 87 percent of Americans of all political stripes — many of whom have pensions, retirements and other investments overseen by the SEC — agree that public companies should disclose their risks from climate change.
Once the final SEC rule comes into effect in the months to come, more corporations in the U.S. and abroad will undoubtedly take steps to adapt to climate change, remain competitive across international boundaries and prepare for a new age of clean commerce focused on sustainability. At the same time, the rule will help drive the protection of nature and key biodiversity by facilitating the shift of financial capital allocation away from carbon-intensive activities and towards investments that will speed the transition to a net-zero economy.
The climate-induced disruptions unfolding across the globe present many risks for people and businesses, but savvy, forward thinking leaders can seize this moment to drive meaningful and measurable change. Government actions like this new SEC rule empower business sustainability leaders to deliver significant benefits to communities, companies and the world-at-large.
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Image credit: Thom Milkovic via Unsplash