Policy and Legal

As the U.S. Securities and Exchange Commission works to finalize a new rule requiring climate disclosures by public companies, the NAM is mobilizing to defend manufacturers.

The background: Manufacturers have long been leaders on climate solutions, working to create the products and technologies necessary to face the challenge of climate change.

• Manufacturers also regularly provide climate-related information to their investors, including via corporate sustainability reports, third-party reporting frameworks and SEC filings.
• At the beginning of the Biden administration, however, the SEC made clear that it was interested in creating a rule to enhance and standardize these disclosures.
• In the months since, the commission has taken steps toward that goal—and the NAM has stepped up to protect manufacturers.

In March 2021, the SEC issued a request for information on climate disclosures. The NAM responded, urging the SEC to adopt a flexible, principles-based framework that allows companies to provide investors with material information about climate risks in a consistent and comparable manner.

In September, the SEC’s Division of Corporation Finance issued new guidance calling into question companies’ existing climate disclosure practices—including the common practice of supplementing SEC filings with a sustainability or corporate social responsibility report.

• The NAM pushed back against the guidance, cautioning the division against setting new standards without a formal rulemaking process.

In October, the division released guidance drastically limiting the ability of companies to exclude climate-related shareholder proposals from the annual proxy ballot—even if those proposals are unrelated to a business’s operations.

• The NAM pushed back, emphasizing the importance of company-specific decisions for protecting manufacturers and their long-term shareholders.

The new rule: The SEC released a proposed rule in March that would significantly expand public companies’ climate disclosure obligations.

• First, the rule would require qualitative descriptions of companies’ climate-related risks and any efforts to respond to those risks.
• It also would require quantitative reporting of companies’ greenhouse gas emissions and institute a new mandate that companies conduct quantitative climate impact analysis within their consolidated financial statements.
• You can read more about the specifics of the rule here.

NAM in action: The NAM has spent the past several months connecting with manufacturers across the country to understand the real-world impact of the SEC’s proposal.

• Through a range of webinars, listening sessions and roundtables, we have been able to explain the proposed rule, gather vital feedback and map out the way forward.

What’s next: The NAM intends to provide comments to the SEC in June, highlighting provisions within the proposed rule that are impractical, costly, overly prescriptive, confusing for investors or not reflective of current climate disclosure practices.

• The NAM will call on the SEC to make targeted changes to its proposal to increase flexibility, focus on material information for investors and reduce costs, burdens and liability for companies.

What we’re saying: “Manufacturers are the leaders in America’s fight against climate change—and in order to continue that work, we need climate disclosure practices that support sustainability, rather than increasing costs for companies and confusing investors,” said NAM Senior Director of Tax and Domestic Economic Policy Charles Crain.

• “Any SEC climate disclosures rule needs to be less prescriptive, more flexible and solely focused on materiality in order to accurately reflect current practices.”
• “The bottom line is that a climate disclosures rule can’t just sound good; it has to actually work in the real world.”