If you order a company to reveal how much it pollutes, would it clean up its act? And if a business has to chalk out all the ways extreme weather and rising sea levels hurt its bottom line, will that force it to better prepare?
California certainly thinks so. The Golden State recently enacted two climate laws. One would make billion-dollar businesses in the state — the likes of Apple, Google, Walmart, and Chevron, more than 5,300 companies in total — disclose their greenhouse gas emissions publicly. The second requires companies making more than $500 million a year, applying to more than 10,000 companies, to report their climate-related financial risks.
To limit climate change, simply getting a handle on where heat-trapping gasses are coming from is a critical step. And figuring out how rising average temperatures will hurt businesses could make the cost-benefit case for investing in more action on climate change right now.
A paper published in the journal Science in August noted that disclosure rules could help policymakers craft further, more targeted regulations that lead to direct emissions reductions. Exactly how much of an impact this will have on investments and climate pollution is not clear. Environmental activists argue that these measures need further backing with regulations that ratchet down fossil fuel production and consumption overall.
The SEC is expected to publish its climate disclosure rules in the coming months. It’s not certain how strict the final rules will be, but it shows that regulators are paying attention, which in turn could change how everyone does business. And California will be an important laboratory for how these rules play out. According to Newsom, the regulations demonstrate “California’s continued leadership with bold responses to the climate crisis, turning information transparency into climate action.”