The rule would generate detailed information on how corporations, financial services firms and other businesses are being affected by climate change. It would force executives to explain how they’re coping with extreme weather, supply chain disruptions and other climate-related upheavals. It follows years of shareholder demand for more information and an admission by the SEC that existing requirements are inadequate.

“This is a core bargain Congress laid out in the 1930s,” SEC Chair Gary Gensler said at Monday’s meeting. “Investors get to decide which risks to take as long as public companies provide full and fair disclosure and are truthful in those disclosures.”

Commissioners voted 3-1 along party lines to publish the proposal, which will be open for public comment for at least 60 days.

On one level, the proposal merely writes widespread practices into law. Thousands of companies already disclose emissions and reduction targets under voluntary standards set by the business community. The SEC cited two of those — the Task Force on Climate-Related Financial Disclosures and the Greenhouse Gas Protocol — and modeled some of its proposals on those frameworks.

The proposed rule also relies on the legal concept of materiality, information that a shareholder might deem important to a company’s revenue, profits or operations, for example. Companies already are required to disclose material information, and many include climate risk in their disclosures.

Companies would have to disclose emissions generated by operations and energy use — known as scope 1 and scope 2 emissions.

Indirect emissions generated by suppliers and customers — scope 3 — must be disclosed if they are material to a company’s performance or if the company has set targets for reducing emissions. A safe harbor would shield companies from legal repercussions stemming from misreporting scope 3 data, which in part relies on suppliers providing accurate information to the companies.

Smaller firms would be exempt from scope 3 disclosure, and it would be up to individual companies to determine if their emissions are material.

Scope 3 emissions account for 75 percent of electric utility emissions and 88 percent of emissions from oil and gas companies, according to research firm IHS Markit. The debate over these indirect emissions likely will determine the rule’s final shape and whether it proves acceptable to Biden’s progressive allies.

“This rule can and should be strengthened,” said Lena Moffitt, chief of staff of Evergreen Action, a nonprofit advocacy group. “Leaving it up to issuers to determine the materiality of Scope 3 emissions, and shielding those issuers from liability for providing false information, would allow issuers to omit the majority of their emissions from their disclosures.”

And it remains to be seen how companies will verify emissions through audits, said Danielle Fugere, president of shareholder advocacy group As You Sow. Identifying clear standards so investors can easily compare audits is essential if the SEC wants to avoid repeating the mistakes in the voluntary carbon offset market, where a gusher of independent firms has led to a morass of credits with questionable climate benefits.

The SEC draft rule reflected input from the business community, which had asked for safe harbors and a long runway to meet new requirements.

“It is heartening that some of these considerations were taken into account,” said Tom Quaadman, an executive vice president at the U.S. Chamber of Commerce. “We’re at the very start of a process, and we’re going to have to see where the final rule ends up. It’s still a jump ball.”

Shareholders, consumers and business groups have demanded uniformity and legal accountability, which Gensler has promised to deliver. In thousands of comment letters to the SEC, corporations and shareholders largely aligned on the need for standardized climate risk reporting.

While stakeholders have yet to fully digest the 510-page proposal, many investor and environmental groups greeted it with optimism.

“It seems like a very measured, balanced approach,” said Steven Rothstein, managing director of the Ceres Accelerator for Sustainable Capital Markets, a nonprofit advocacy group. “At a high level, this seems to be a calibrated effort.”

While it is big news to players in the $229 trillion global capital market, the draft rule will have a relatively small role to play in climate action. The SEC’s goal is to provide information to investors, and the proposal does not require companies to reduce their climate footprints.

Commissioner Hester Peirce, a Republican appointee who voted against the proposal, said the agency has no authority to police corporate climate activity.

“We are not only asking companies to tell us what they do, but suggesting how they might do it,” Peirce said during the meeting. “Society is in big trouble if we are looking to SEC lawyers, accountants and economists to dictate how companies should address climate change.”

Here are some highlights of the proposal:

— Climate-related information, including any near-, medium- or long-term risks to the bottom line, would be required in corporate filings such as the SEC’s Form 10-K. Many companies currently confine their disclosures to informal reports that carry less legal liability.

— Companies that have promised to eliminate greenhouse gas emissions or reduce their impact with a net-zero plan must report annually on their progress. They will be required to detail their use of offsets — the debated practice of paying to plant trees, capture carbon, generate renewable energy or other activity to compensate for emissions.

— Emissions generated by a company and its energy use — scope 1 and scope 2 emissions — must be disclosed. Indirect emissions generated by a company’s suppliers and customers — scope 3 — must be disclosed if they are material to a company’s performance or if the company has set targets for reducing emissions. All disclosures would be phased in, with a legal safe harbor for scope 3 disclosures. Smaller companies would be exempt from scope 3 disclosure.

— Large companies would be required to obtain assurance from an independent third party that their emissions disclosures are accurate. Third parties might include traditional accounting firms, but could include other experts, such as engineering firms.

— Companies that put a price on carbon to inform their planning and investment would need to disclose that price and how it is set. Internal carbon pricing — effectively, a private tax on polluting activity — has won adherents even as policymakers debate a tax on carbon.