A recent Law360 article discusses what could happen to businesses should the SEC’s proposed climate disclosure rule be enacted. Among many things, the rule will mandate companies provide more detail on their greenhouse gas emissions and their climate risk exposure. These new details include Scope 3 emissions, which are entirely outside of a company’s control. Not only will the climate disclosure rule add significant costs to companies, it will also slow and discourage companies from going public.
The process of taking a company public is already strenuous. Adding these additional climate disclosure requirements will add to the burden and prevent companies from being able to accomplish the feat. Law360 quotes Michael Bellin, PwC’s US IPO co-leader, who said “Preparation of the disclosures will almost certainly require significant time and effort, potentially delaying or derailing an offering or a merger transaction. Consequently, these requirements may dissuade companies from undertaking an initial public offering or acquisition using securities.”
Law360 also addressed the SEC’s Small Business Capital Formation Advisory Committee, whose purpose is to advise the SEC on capital formation policies that affect small businesses. Recently, the committee recommended that the SEC should perform a cost-benefit analysis to see how the new climate disclosure requirements would impact small companies specifically. The committee members also believe that the SEC’s rules should have the best interest of each and every company at heart, but it’s unclear if that mission applies to this proposed climate disclosure rule.
There is so such widespread opposition and scrutiny to the rule that the SEC had to re-open their comment period that originally closed in March, as pointed out in a recent Bloomberg Law article. The new deadline for comments was November 1st, and they are now left with thousands of comments to go through, making it highly unlikely for any decision to be made before the end of the year.