House Passes Bill That Would Mandate Disclosure of Climate Risks

Publicly traded companies would be required to disclose financial risks related to climate change under legislation approved by the House Wednesday and sent to the Senate where it faces an uncertain future.

The legislation would also require disclosure of other so-called environmental, social, and governance information such as that related to political spending, tax jurisdictions and executive pay raises. It was approved by a vote of 215-214 over opposition from Republicans and business groups including the U.S. Chamber of Commerce.

“Investors who are the true owners of our nation’s public companies recognize the importance of this information to their decision-making, and have been demanding this information for years,” House Financial Services Committee Chair Maxine Waters said earlier this week. She cited research from CDP, an international nonprofit group, finding that the 215 largest global companies have reported about $1 trillion at risk from climate change, mostly over the next five years.

The legislation comes as more than 70% of companies, on average, still don’t share climate-related information across categories recommended by the Financial Stability Board’s Task Force on Climate-related Financial Disclosures, according to Bloomberg Government.

(Michael R. Bloomberg, the majority owner of Bloomberg LP, is chairman of the private sector task force.)

The measure is unlikely to muster the Republican support needed to pass the narrowly divided Senate, but it comes as the Securities and Exchange Commission is preparing its own set of new corporate disclosure requirements for climate change risks, board diversity, and companies’ workforces by October.

Under the House legislation, annual disclosures would be required of information related to the physical risks of flooding, extreme weather and rising temperatures to fixed assets, as well as “transition risks” created by efforts to reduce greenhouse gas emissions and increase resilience to climate change, according to an analysis of the bill by Bloomberg Government.

The bill would also require the SEC to issue new rules requiring disclosure of spending on political ads and dues paid to trade groups. Multinational businesses would also have to disclose the tax jurisdictions where each subsidiary resides and any other locations where subsidiaries are organized or incorporated. In addition, public companies would face mandates to disclose the percentage increase in median pay for executive officers and all other employees in the last fiscal year.

Opponents of various components of the package includes the American Petroleum Institute, the Business Roundtable, and the National Association of Manufacturers as well as Republicans such as Representative Patrick McHenry of North Carolina who said it would “lead to the naming-and-shaming of America’s job creators.”

To contact the reporters on this story:
Ari Natter in Washington at anatter5@bloomberg.net;
Michael Smallberg in Washington, DC at msmallberg@bloomberg.net

To contact the editors responsible for this story:
Jon Morgan at jmorgan97@bloomberg.net

Elizabeth Wasserman

© 2021 Bloomberg L.P. All rights reserved. Used with permission.