How a Climate Rule Got Watered Down

What should companies have to tell their investors about climate change risks?

The U.S. Securities and Exchange Commission will unveil its long-awaited disclosure rules tomorrow. They are expected to be much weaker, Reuters reported, than what the agency first proposed more than a year ago, after intense corporate lobbying and a backlash from Republicans.

“The general view is that the rules will be scaled back fairly meaningfully from the original proposal,” Michael Littenberg, an attorney at Ropes & Gray, said.

For the first time, all U.S.-listed companies will probably be required to disclose significant risks posed by climate change as well as their own climate footprints, which are known as Scope 1 and 2 emissions. But notably, the final S.E.C. rules are not expected to require companies to disclose their Scope 3 emissions, which are produced by suppliers or consumers of a company’s product.

During the S.E.C.’s comment period, companies and business groups flooded the agency with a record number of comments pushing back on the rules, arguing that disclosure would be burdensome for businesses and of limited utility for investors.

The political ground has also shifted. Over the past two years, Republicans have waged war on all things E.S.G. — shorthand for environmental, social and governance principles in business.

Even though the S.E.C. has watered down its initial proposal, right-wing critics will almost certainly sue the agency anyway — “just as surely as the sun rises in the East,” one expert told our sister newsletter DealBook — as part of a broader legal attack on government agencies and regulators. Climate activists are also likely to file lawsuits, arguing that the new rules don’t go far enough.