• The SEC released a proposal that would require companies to disclose climate-related financial risks.
  • Climate Advisor Gina McCarthy said it's a "huge step" toward protecting Americans' savings.
  • Many retirements and pensions are invested in companies that could take a hit due to the climate crisis.

President Joe Biden's administration wants to ensure American companies are accounting for financial risks brought on by the worsening climate crisis.

On Monday, the Securities and Exchange Commission (SEC) released a proposal that would require companies to disclose their greenhouse gas emissions and other "climate-related risks" that would impact their business and financial standing, according to the press release. As National Climate Advisor Gina McCarthy explained on Twitter, companies' emissions data would be independently audited to ensure all data is accurate and reflective of the amount of emissions.

"This is a huge step forward to protect our economy and boost transparency for investors and the public," McCarthy wrote.

"This climate disclosure rule will be good for business and good for the American people," she added. "We know climate change poses a systemic risk to our economy, and more transparency will empower better decision-making by investors, retirement plans, and pension funds."

This is Biden's latest step in attempting to shield Americans from financial hits related to climate change. As Insider previously reported, the president unveiled a plan in October with strategies to mitigate the two main risks brought on by the climate crisis: physical risks brought on by extreme weather that could damage assets, and transition risks that refer to costs incurred when shifting away from a carbon-focused economy toward clean energy, like wind and solar.

The SEC's proposal is intended to build on those protections. Should the rule go into effect, it would require companies to disclose four things:

  1. How the company is managing climate-related risks
  2. How likely it is that any climate-related risks will have a material impact over businesses in the short and long-term
  3. How any climate-related risks have affected or are likely to affect business models
  4. And the impact of natural disasters on companies' financial statements.

The public has 60 days to comment on this proposal.

With the climate crisis continuing to worsen, many experts argue these changes can't come any sooner. The United Nations recently reported that up to 3.6 billion people are highly vulnerable to climate change, and if temperatures continue to rise, some cities may become uninhabitable.

With so many people's lives, and finances, at stake, SEC Chair Gary Gensler said in a statement that "investors representing literally tens of trillions of dollars support climate-related disclosures because they recognize that climate risks can pose significant financial risks to companies, and investors need reliable information about climate risks to make informed investment decisions."

"Companies and investors alike would benefit from the clear rules of the road proposed in this release," Gensler said. "I believe the SEC has a role to play when there's this level of demand for consistent and comparable information that may affect financial performance."

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