Trader Talk

Gary Gensler, chairman of the Commodity Futures Trading Commission (CFTC), speaks during a Senate Banking Committee hearing in Washington, D.C., U.S., on Tuesday, July 30, 2013.
Andrew Harrer | Bloomberg | Getty Images

Securities and Exchange Commission Chair Gary Gensler said Wednesday he wants mandatory disclosure on climate risks, and he wants the agency to develop a rule by the end of the year.

Speaking at a webinar titled “Climate and Global Financial Markets,” Gensler said investors are demanding more information on climate change. He said prior SEC guidelines on climate disclosure were voluntary, resulting in inconsistent disclosures.

“Investors are looking for consistent, comparable, and decision-useful disclosures so they can put their money in companies that fit their needs,” he said. “Companies and investors alike would benefit from clear rules of the road.”

In March, the SEC sought comment from the public on climate change disclosures.

“More than 550 unique comment letters were submitted in response to my fellow Commissioner Allison Herren Lee’s statement on climate disclosures in March,” Gensler said. “Three out of every four of these responses support mandatory climate disclosure rules.”

He said he has asked his staff to consider whether climate disclosures should be filed as part of a company’s Form 10-K, the annual report a company files on its financial performance. 

Gensler also wants disclosure to be “decision useful.” Such useful information might include how the company’s leadership manages climate-related risks and opportunities, as well as metrics related to greenhouse gas emissions, financial impacts of climate change, and progress toward climate-related goals.

He also wants to keep companies accountable for their pledges on addressing climate change, noting that 92% of companies in the S&P 100 plan to set emission reduction goals. 

What is ESG?

Gensler again took aim at funds that claim they are “green”, “sustainable” or “low-carbon” which have been tapping into the high interest level for Environmental, Social and Governance (ESG) investing.

“When it comes to sustainability-related investing, though, there’s currently a huge range of what asset managers might mean by certain terms or what criteria they use,” he said.  “I think investors should be able to drill down to see what’s under the hood of these funds.” 

He said he was considering recommendations that fund managers be required to disclose the criteria and data they are using to make such claims.  He also said his staff was looking into updating how funds are named, noting that a fund name should reflect what it is actually investing in.

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