US watchdogs will this week vote on new climate disclosure rules, bringing to a head two years of argument over measures for companies to report on their carbon emissions.

On Wednesday, the Securities and Exchange Commission will vote on the requirements, which opponents have argued are too expensive and “burdensome” to implement or go far beyond the jurisdiction of the regulator.

Supporters say investors need clear information on climate risks in companies and the rules will “level the playing field”.

The final version of the rules has yet to be revealed. They will likely include requirements to disclose material climate risks, scope 1 and 2 emissions, plans for emissions reduction and independent verification of emissions.

It remains unclear where the SEC could set the level of materiality, and whether scope 3 emissions will be included in reporting requirements. Reuters reports that scope 3 emissions will not be in the final version.

Incremental requirements

Writing for the Harvard governance blog, Michael Littenberg and Marc Rotter, of law firm Ropes & Gray, say: “Thousands of US-based companies—including a large number of SEC registrants—are subject to these regulatory and commercial requirements. For these registrants, the question is whether what incremental requirements will be added by the SEC’s rules.”

Littenberg and Rotter add that companies will be looking out for the “granularity” of the reporting requirements, the thresholds for disclosure, phase-in periods and how the rules might work with other reporting frameworks.

This week, the International Corporate Governance Network (ICGN), a club for fund managers, endorsed the SEC’s new standards. “Investors have been calling for comparable, reliable and verifiable corporate sustainability disclosures to make informed stewardship and investment decisions,” a statement says.

Corporate leaders will also be looking to see whether specific measures or provisions address the specific responsibility of boards.

The SEC’s rules come after other jurisdictions have already toughened their climate reporting requirements. The European Union has introduced the Corporate Sustainability Reporting Directive (CSRD), which  includes disclosures of scope 3 and forms an update of earlier legislation, the Non-Financial Reporting Directive, introduced back in 2014.

The CSRD also operates on the ‘double materiality’ principle: companies must report on the impact of climate change on their businesses, but also the impact of their organisations on climate and the environment.

The UK is in the process of tightening its climate disclosure rules, with a review under way potentially leading to the adoption of International Sustainability Standards that were finalised last year by a sister-body of IFRS Foundation. Other jurisdictions are also considering adoption of the standards. The ICGN believes US rule makers should use these new standards as a reference point for its own work.

This 6 March will be a big day in US corporate governance, with climate disclosures catching up with other major jurisdictions. Opposition will remain and continue. But the rules are inevitable. Only the detail remains to be seen.