Editor's note: This article appeared on Project Syndicate.

We spend a lot of time advocating for action that could be considered radical. This is not one of those days.

In March 2022, the U.S. Securities and Exchange Commission (SEC) proposed a new rule that would require publicly traded companies to disclose climate-related risks and, to varying extents, their greenhouse gas emissions. As the public comment period comes to a close, the SEC should adopt this proposed disclosure rule in its entirety. It’s plain common sense.  

As written, the proposed rule would require companies to disclose greenhouse gas emissions data for operations and electricity consumption, as well as emissions related to goods bought and sold. The SEC oversees markets trading $82 trillion annually and, if adopted, this rule would apply to all companies publicly trading in the United States.  

It sounds fancy, but it is really just about information. It’s about requiring businesses to share with investors how climate change could impact their returns. Information is the bread and butter of the financial regulators, CEOs, and investors alike. It’s what drives markets up and down every day of the week. Each trade is connected to an investor making decisions based on the best available information. There’s nothing radical about information. 

For the United States, the SEC’s action comes at just the right time. Climate risks are already material and expected to grow. Businesses bore a stiff share of the $145 billion in costs from climate change to the United States in 2021. Investors and governments around the world are already pushing for greater information transparency around climate-related risk.  

The Task Force on Climate-Related Financial Disclosure (TCFD), convened by the central banks of the G20 and comprising investors and companies from around the G20, recommended disclosure in 2017. As of today, the TCFD’s recommendations are supported by more than 3,000 companies and 90 jurisdictions around the world.  

It doesn’t end there. The International Accounting Standards Board expects to issue standards by the end of the year. China is testing mandatory disclosure. The United Kingdom is phasing in TCFD-style mandatory disclosure over the next three years. And the European Union is now working out its Sustainable Finance Taxonomy, which goes further than climate risk disclosure by categorizing economic activity by how sustainable it is. Corporate greenhouse gas emissions reporting will be a requirement of all these initiatives. 

Understanding more about how climate change is impacting business is exactly the sort of information CEOs need to manage risks and take advantage of opportunities. That’s why a bipartisan, business-heavy committee (on which WRI also sat) recommended disclosure in a 2021 report to the Commodities Futures Trading Commission. 

There’s nothing new here for many companies. Leading companies are already disclosing climate-related risks, including those associated with their supply chains. Apple, Best Buy, Coca-Cola, Cargill, Ford, Gap, Hilton, Starbucks, the list goes on. Far from fringe, these companies are the working definition of mainstream America. Even oil and gas companies Shell, Total and Equinor have a long track record of reporting on emissions across their value chain. 

Really savvy CEOs are already using climate-related risk disclosures to identify and pursue new business opportunities for innovation and technology. The Chairman and CEO of General Electric, Lawrence Culp, was spot on when he wrote: “We are particularly aware of the engineering challenges still to be solved to make the ambition of net zero a reality…. However, we believe those challenges are also key strategic opportunities for GE.” 

CEOs increasingly understand that a 21st century economy is green, efficient and resilient. The same can be said of investors. Sustainable investment inflows surged to a record $649 billion in 2021. But right now, availability and quality of data is very uneven.  

Businesses follow wildly divergent approaches to disclosing their climate risks. Some count their emissions one way, others another way. Some don’t report emissions associated with the use of its products — so called Scope 3 emissions is something the proposed SEC rule rightly requires. And some are completely in the dark, not reporting and managing emissions at all. As a result, many companies are unaware of the climate risks and opportunities their companies face. Instead of clarity, we have confusion and risks loom large.  

When companies make uniform disclosures, investors will be much more capable of discerning where money should flow. When investors have disclosures mandated from all companies, firms compete on even footing that drives virtuous competition. Armed with better information, investors can make better decisions for their clients.  

It’s time for all financial actors — businesses, investors, and governments — to face up to the risks of climate change. They are already upon us. Requiring companies to disclose climate-related risks is not radical, it is realism.  

Background of windmills at dusk with text that reads "Paying for the Paris Agreement: Tools for planning, raising, redirecting and monitoring finance for national climate efforts."

Learn more about how mandatory risk disclosures can help countries pay for their climate goals with our Paying for Paris Resource Hub.

The global shift towards mandatory, rather than voluntary, disclosure is well under way. By acting now, the SEC can provide a much stronger foundation for markets to stand upon. Moreover, the U.S. can remain a rule maker, rather than a rule taker. Whether you’re an investor, a CEO, or a citizen with a regular 401k, using better information to make better financial decisions is just common sense.