The Securities and Exchange Commission unveiled plans on March 21 of what possible climate disclosures could look like for companies in the coming years.

This comes after investors showed dissatisfaction regarding the lack of uniformity of companies’ climate disclosures, making it difficult for investors to compare companies. This provision aims to “provide investors with consistent, comparable, and decision- useful information for making their investment decisions,” according to SEC Chair Gary Gensler.

Although many companies already provide information regarding their climate related goals and action plans, they are not audited by an independent party, something the SEC is looking to make a permanent part of filing requirements.

The SEC is allowing 60 days for feedback regarding the rule, after which a final draft will be composed and presented.

Under this rule, the SEC would require companies to disclose emissions from both direct and indirect operations, known as Scope 1 and Scope 2. This would include emissions from energy purchased from suppliers.

Under Scope 3, companies which have set emission targets must also provide indirect emissions, produced by products which they sell.

The SEC added that there would be exceptions depending on companies size, a recurring concern among critics.

The climate disclosures are expected to be introduced sometime between 2023 and 2026.

Several parties have expressed apprehensiveness towards Scope 3, due to difficulty in measuring these emissions, which could expose companies to legal plight if their estimates are off. To this concern the SEC has said if companies provide data in good faith, this shouldn’t be a concern.

Amalgamated Bank Chief Sustainability Officer Ivan Frishberg said during a briefing, that “It’s really when you come to Scope 3 that you understand what the associated emissions are” and that companies in the same industry have relatively little to no differences when it comes to emissions from Scope 1 and Scope 2.

The SEC has not targeted any industry in this proposal, but it is believed that it will provide valuable information to encourage the transition to electric vehicles.

It will also be interesting to see how investors react to the emission productions of oil and gas producers and whether it will be enough to push investors towards more sustainable sources of energy.

Many opinions and views have come forth regarding the SEC proposal. Investors for the most part are in favor of this proposed requirement, but company leadership who will have to spend extra time and capital to report data on their emissions are not as eager.

The proposal has received backlash from the U.S. Chamber of Commerce and prominent  Republicans. Republican Sen. Patrick Toomey said the rule “extends far beyond the SEC’s mission.”

Last June, 16 Republican state attorney generals expressed their disdain toward the climate disclosure requirement to Gensler, arguing that companies are “well positioned to decide whether and how to satisfy the market’s evolving demands for both customers and investors.” They also added that such a provision would become politicized and cause division instead of creating unity.

Democratic senators have taken the opposite stand on the proposed rule.

Sen. Sheldon Whitehouse expressed that the SEC should require even more stringent disclosures than have been proposed. Whitehouse also said provisions regarding “climate-related lobbying and influencing activities” should also be targeted.

Sens. Sean Casten and Elizabeth Warren have lobbied for stricter Scope 3 emissions requirements.

President Joe Biden’s executive order urging for constructive steps to tackle the risks associated with climate change, including limiting greenhouse gas emissions last year, has created an environment alongside investors’ rising demand for a similar filing requirement.

More accurate data and awareness of dangers posed by climate change in recent years has pushed the issue to the forefront of the minds of many investors and consumers. The popularity of environmental social and governmental filters has also allowed for the proposal of climaterelated disclosures to be more widely accepted.