On Monday, the Securities and Exchange Commission released a proposal for what could become the first ever mandate of what U.S. companies need to tell investors about their carbon footprint.

Somewhat predictably, prominent Democrats celebrated the proposed rules, while Republicans claimed overreach. For their part, Environmental, Social, and Governance (ESG)-aligned investors said the proposed rules could bring crucial transparency for investors in exchange for what will be a manageable bureaucratic burden for companies.

In a Yahoo Finance interview Monday, KPMG partner Rob Fisher stressed the rule could bring consistency that will allow investors to make an "apples to apples" comparison when looking at ESG concerns.

“Everyone's been able to tell their own narrative their own way and disclose what they want to disclose and not disclose what they don't want to,” said Fisher, whose portfolio includes global ESG transformation. He added, “Investors, in particular, are going to really appreciate [consistency]."

The SEC dropped its highly anticipated proposal on Monday and then approved it in a 3-1 vote with the next step being a two-month public comment period. In a statement Monday, SEC Chair Gary Gensler noted climate issues can pose major risks to companies. The rules would mandate that they disclose their strategies for managing the risks as well as any targets companies have to mitigate climate change.

The rules aim to “provide investors with consistent, comparable, and decision-useful information for making their investment decisions and would provide consistent and clear reporting obligations for issuers,” Gensler said.

‘Substantially increase compliance costs’

The lone dissent came from Trump appointee Commissioner Hester M. Peirce, who contended it would undermine the existing disclosure setup and amplify the voices of ESG stakeholders.

“It forces investors to view companies through the eyes of a vocal set of stakeholders, for whom a company’s climate reputation is of equal or greater importance than a company’s financial performance,” she wrote in her dissent.

Other critics of the rule focused on its reporting obligations. Senator Bill Hagerty (R-TN) said in with a letter to Gensler that Congress needs to review the rules because they could increase costs for companies.

“If adopted, these rules would substantially increase compliance costs for publicly traded companies, which would have the effect of raising prices for American consumers, reducing American jobs, and lowering returns for American investors,” he wrote.

Bill Davis, founder and portfolio manager of Stance Capital, pushes back on Hagerty's argument. Davis, whose firm directs clients to ESG friendly investments, said the rule would help investors “separate the truths from the half truths, and the all out greenwashing.”

Moreover, Davis contended the extra compliance work won't be too onerous for companies. “Those companies that have been lobbying against mandatory disclosures are likely most concerned about being viewed as a laggard within their respective industry group,” he says.

For some, identifying those laggards is the whole point.

“For too long, Wall Street has been allowed to conceal its exposure to climate-related risks from investors, leaving many Americans completely in the dark about a major threat to the long-term security of their life savings,” Lena Moffitt, chief of staff at climate action group Evergreen Action, said in a statement.

‘I'm sure it will evolve’

If the rules pass as currently written, public companies would need to include specific climate metrics on their Form 10-K reports and outline any plans to achieve lower emissions.

Some of the initial enthusiasm from certain corners might have stemmed from the fact that the requirements were somewhat less restrictive than what many initially expected or feared.

The rules include so-called Scope 1 and 2 emissions, those emissions resulting directly or indirectly from company-owned facilities. But they didn't fully include Scope 3 emissions, effects up and down the supply chain and outside of the companies' control. The proposed rules would require companies to disclose Scope 3 emissions only if they would be material to investors — the SEC would also phase in that requirement.

For his part, Fisher notes that the rules will likely evolve during the comment period. Overall, he said, "Companies have a real opportunity to demonstrate the value that they're creating."

Ben Werschkul is a writer and producer for Yahoo Finance in Washington, DC.

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