Climate Risk Scorecard

The Securities and Exchange Commission (SEC) is charged with regulating securities markets and the securities industry. Its core mission is to protect investors, maintain fair, orderly, and efficient markets, and facilitate capital formation.  

The SEC is tasked with a broad and diverse set of responsibilities. This includes enforcing the federal regulations that govern the securities markets and their participants, interacting with and educating investors, overseeing approximately $82 trillion in securities trading annually on U.S. equity markets, reviewing the disclosures and financial statements of approximately 4,300 exchange-listed public companies with an aggregate market capitalization of $30 trillion, and overseeing the Public Company Accounting Oversight Board (PCAOB) and the Municipal Securities Rulemaking Board (MSRB).  

To guarantee fair access to the markets, the SEC requires public companies, fund and asset managers, investment professionals, and other market participants to regularly disclose significant financial and other information to provide investors with timely, accurate, and complete information that will inform their investment decisions.  

The federal securities laws are based on the enduring principle that regulation of the capital markets is necessary to avoid “national emergencies, which produce widespread unemployment and the dislocation of trade, transportation, and industry.” Physical and transition climate risks present a profound, systemic risk to U.S. capital markets, combining in unexpected and correlated ways, with serious, disruptive impacts on asset valuations, global financial markets, and global economic stability. Efforts to achieve significant mitigation of GHG emissions are underway in many nations, and these policies are likely to affect businesses and financial markets in profound ways, such as changing business models and shifting capital flows away from carbon-intensive activities. Further, climate risk poses a variety of material risks to companies of all sizes in all industries across the nation, ultimately impacting investors, workers, and savers.   

The SEC plays a critical role in addressing the increasing call from investors lamenting the current weaknesses in climate risk data, and calling for more reliable and high-quality disclosures. To function effectively, capital markets need comprehensive, decision-useful data from enterprises facing material climate risks. Better climate disclosures would give investors and shareholders access to consistent, comparable, and reliable information, so that they can allocate capital in a manner that reduces risk. Similarly, climate risk offers opportunities for innovation, investment, and growth, and the SEC has a statutory mandate to identify, facilitate and enable the associated capital formation emerging from those opportunities.