The SEC climate rule: 7 things investors need to know

cnbc.com:

The Securities and Exchange Commission on Monday unveiled a sweeping proposal to expand investors' insight into the threat that climate change poses to public companies and how they contribute to a warming planet.

If adopted, the proposal would have a far-reaching impact across the spectrum of investors, according to legal and financial experts.

Here's what investors need to know about the 510-page rule.

The SEC proposal concerns disclosures that all publicly traded companies make to investors on a regular basis.

The agency is trying to require a minimum level of climate-related reporting as part of this disclosure framework.

The title of the proposed rule — «The Enhancement and Standardization of Climate-Related Disclosures for Investors» — outlines its broad goal.

The SEC requires publicly traded companies to be transparent about risks and other information they deem «material» to the firm. That can encompass a broad range of items, from cybersecurity risk to geopolitical risk, for example.

Such disclosures are the backbone of the agency's regulatory regime, according to Erin Martin, partner at the law firm Morgan Lewis and a former attorney at the SEC.

Investors use the reports to assess a company's financial health and governance, for example, which in turn impact decisions to buy, hold or sell a company's stock or bonds.

SEC officials say they're responding to investor demand for transparency around climate-change risk — which Commissioner Allison Herren Lee on Monday called «one of the most momentous risks to face capital markets since the inception of this agency.»

Human-caused climate change has fueled hotter temperatures and drier conditions across the world, and scientists widely believe it's contributing to