What are the potential financial gains and losses for those affected by the SEC climate rule?

• Companies that produce clean energy and emit low carbon would gain, while those that produce fossil fuels would suffer losses.
• Companies with high carbon footprints, such as those in heavy manufacturing and industrial chemicals, will not be expected to reduce their emissions immediately, but they will need to disclose their emissions data.
• The demand for compliance and auditing service companies, as well as software companies that automate processes, will increase.

The Securities and Exchange Commission has proposed new rules that require companies to disclose their climate change risks and greenhouse gas emissions. Although it may take some time for the proposal to become law, its impact will be significant.

The standardization of climate disclosure will create a new industry of professionals and technology solutions to monitor, verify, and report climate risks. Companies that voluntarily track and disclose their emissions data will have a competitive edge over their peers.

The SEC climate rule will enhance transparency for investors, customers, and stakeholders to make informed decisions about cleaner alternatives, potentially leading to financial losses for climate laggards as customers and investors shift their investments to greener options.

Winners: Companies that control carbon emissions

E3G's Claire Healy stated that companies with low carbon emissions and clean energy usage will gain from the SEC's climate rule, while carbon-heavy companies will ultimately suffer in the long run.

Aggarwal, a professor of finance at Georgetown and director of the Georgetown University Center for Financial Markets and Policy, stated that clear emissions data provides stakeholders with a solid foundation to hold companies accountable for their irresponsible emissions and climate impacts.

Aggarwal informed CNBC that there is a historical precedent for providing investors with clear information that enables them to divest from companies that do not meet certain ethical standards.

Universities divested their endowments from fossil fuel investments due to student protests.

Aggarwal stated that although they may have experienced a decline in returns initially, their long-term risk reduction strategy would ultimately prove beneficial.

The SEC climate data will not be the only element of a company's sustainability narrative.

Healy stated that the SEC proposed rule is another tool in the arsenal aimed at altering the investment landscape and accelerating decarbonization. The rule will be added to other factors that impact investment decisions, such as government policies, carbon pricing, asset-stranding risks, shareholder pressure, social license to operate, and staff retention.

Losers: Businesses with surprisingly bad carbon footprints

When the new rules take effect, companies with high carbon emissions could face a disadvantage.

According to Aggarwal, these companies will face two negative consequences: an increase in the cost of capital and a decrease in revenues. This will affect both the product market and the financial markets, negatively impacting these companies.

As transparency becomes more prominent, it will be easier for both consumers and investors to see exactly what's happening.

The new rule won't be fatal for companies with high emissions if they have already been disclosing their impact, and it won't be a significant issue for companies that lack a viable alternative.

Energy-intensive industries such as manufacturing, industrial chemicals, cement, and pulp and paper are well-known to most investors, according to Brandon Owens, vice president of sustainability at Insight Sourcing Group.

Owens stated to CNBC that there wouldn't be an expectation that they could instantly decarbonize. Instead, he emphasized the need for transparency and a plan to address their carbon footprint.

Winners: Compliance professionals and software

Jupiter, a climate risk analytics company, predicts that advisors, consultants, and auditors with expertise in tracking and reporting climate risk will be in high demand, including many big names in insurance and management consulting, as companies struggle to understand and manage their climate-related risks.

Those that automate carbon accounting and reporting will thrive.

Kentaro Kawamori, CEO of Persefoni, stated that the company's success in the sector would be similar to that of Salesforce.

Kawamori stated that, similar to Salesforce establishing a system of record for customer data, companies will create a system of record for carbon accounting.

Financial services companies will employ artificial intelligence and data analytics in carbon accounting, as they have in financial accounting, but there will always be a role for human beings, according to Aggarwal, who spoke to CNBC.

Losers: Supply chain vendors with messy scope 3 emissions

The SEC rule proposal mandates that companies disclose their direct greenhouse gas emissions, known as scope one emissions, and their emissions from energy sources they use, referred to as scope two. These emissions are relatively straightforward to monitor.

The SEC's proposal mandates companies to track scope-three emissions "if material," even though these indirect emissions from a company's supply chain can be challenging to monitor accurately.

Companies with complex international supply chains may face challenges in implementing ESG practices, according to Joe Schloesser, senior director at ISN, which helps companies monitor and vet contractors and suppliers.

Industries with complex supply chains, particularly those that rely on international suppliers (such as apparel, pharmaceuticals, and manufacturing), will face greater challenges in the short term and may eventually bring back parts of their supply chains or manufacturing to domestic providers, according to him.

Companies that rely on domestic suppliers will have lower carbon emissions from transporting parts, according to Schloesser.

The big ESG fund shuffle

The sustainable fund industry is rapidly expanding, with global assets increasing by 9% to $2.74 trillion at the end of December 2021, as per a January report from Morningstar Direct.

The standard way of comparing emissions across companies and industries will enable investors to make more legitimate climate-conscious investments with the help of the SEC's climate rule.

The standardized framework for reporting information provides clear, comparable, and reliable data, as stated by Bryan McGannon, the director of policy at The Forum for Sustainable and Responsible Investment, in a conversation with CNBC.

McGannon stated that investors can make "fair and accurate comparisons" with apples to apples.

Aggarwal stated that the information could reduce "greenwashing" within ESG funds, as reported by CNBC.

Kawamori stated that the definition of sustainable and climate funds will undergo a rapid change, resulting in numerous big losers.

ESG funds that have been tracking and understanding emissions data from their component companies, including "some very large funds, especially in the private equity space," will be in a stronger position, Kawamori said.