Thursday August 11th, 2022 10:35PM

Companies weigh in on proposed SEC climate disclosure rule

By The Associated Press

WASHINGTON (AP) — The Securities and Exchange Commission moved closer Friday to a final rule that would dramatically alter what public companies tell shareholders about climate change — both the risks it poses to their operations and their own contributions to the problem.

Public comment on the proposal has now closed, with more than 10,000 comments submitted since March by companies, auditors, trade groups, lawmakers, individuals and others.

Comments ranged from concerns about the costs involved for companies getting up to speed, the SEC’s authority to regulate such data and praise that the nation’s top financial regulator was moving to make mandatory the reporting of climate-risks data. If enacted, public companies in their annual reports and stock registration statements would have to report their greenhouse-gas emissions. The largest companies would also have to disclose emissions data related to their suppliers and reveal whether their climate-related risks are material to investors.

For example, the SEC's rule would force companies to disclose in annual statements whether climate change is expected to affect more than 1% of a line item and explain how. “That's incredibly granular,” said Margaret Peloso, a partner at Vinson & Elkins focused on climate change risk management and environmental litigation. “It’s a lot more detailed than many other financial reporting requirements.”

Companies would also have to report on the physical impact of storms, drought and higher temperatures brought on by global warming. They would have to explain how extreme weather events affect their finances, lay out plans for reducing climate risks and outline any progress made in meeting climate-related goals.

“It’s correcting a market problem... which is that investors don’t currently have all the information they need about climate risk in order to make their investment decisions,” said Alex Thornton, senior director of tax policy at the Center for American Progress.

But Republicans who oppose the SEC’s measure insist climate disclosures should remain voluntary. In May, a group of Republican governors including Texas Governor Greg Abbott and Arizona’s Doug Ducey wrote that the rule “forces investors to view companies through the eyes of a vocal set of stakeholders,” and added that it would unduly penalize oil and gas companies.

In a March statement, the U.S. Chamber of Commerce called the proposal overly prescriptive, saying that as written, the rule would “limit companies’ ability to provide information that shareholders and stakeholders find meaningful.”

Auditing firms, trade groups and some lawmakers have repeatedly pointed to the proposal's inclusion of companies' indirect effects on the climate — known as Scope 3 emissions — as a thorny area to report on. Attorneys and auditors say the information could be difficult to obtain for companies with international suppliers or suppliers that are private companies.

“One of the biggest concerns about requiring Scope 3 emissions is the fact that the data is not controlled or possessed by the disclosing company,” the Bipartisan Policy Center said. It added that the SEC gave “scant reasons for how the benefits of requiring its disclosure outweigh what will likely be an extraordinarily costly process.”

But proponents say having detailed information on indirect emissions is critical to understanding how companies affect the climate.

Many public companies already release data on their emissions, as investor interest for such information has risen in recent years. The SEC issued voluntary guidance in 2010 for how companies can report information about climate change. In 2020, more than 90% of S&P 500 companies published sustainability reports, according to the Governance and Accountability Institute.

The SEC’s climate disclosure rule would standardize what public companies report. It would also require them to seek independent certification for some reporting, which would provide investors with much more reliable information than what's currently disclosed, environmental attorneys, auditors and climate-data software companies say.

“There’s a mega trend of demand for this information,” said Tim Mohin, chief sustainability officer of Persefoni, a startup that uses artificial intelligence for carbon accounting. Yet current emissions data that companies report through a patchwork of disclosures is not uniform in quality or timeliness, he said.

“The SEC rule is a major cleanup action,” Mohin said. He previously worked in the Environmental Protection Agency and Senate on environmental policy.

Climate activists, sustainable finance proponents and investors have long advocated for mandatory emissions reporting required of all companies. Once finalized, the U.S. would join a growing number of countries including the U.K. and Japan that are requiring large companies to disclose such information. The European Union is finalizing its reporting standards.

But the SEC’s proposed rule is far from certain. Opponents, including conservative trade groups, Republican lawmakers and others have questioned whether regulating emissions-related data falls under the SEC’s purview. As a result, attorneys say any finalized rule would almost certainly be challenged in court on the question of the commission's jurisdiction.

The SEC estimates staying compliant with the new rule will cost an additional $420,000 a year on average for small public companies and $530,000 a year for larger ones. But costs will vary based on how much companies are already disclosing and factors like how much of the accounting can be done in-house, experts say.

Supporters of the rule hope mandated emissions disclosures will force companies to reduce their climate impacts and guide investors away from companies that do not take steps to reduce their emissions. But some commenters have questioned whether investors would be able to make sense of the volume of information being asked.

The accounting firm Deloitte said the level of detail asked in financial disclosures "may risk confusion among investors.” But it praised the commission for having based the proposal on the Task Force on Climate-Related Financial Disclosures, a group established by G20 countries to standardize climate-related financial reporting.

“It’s going to be a learning curve for a lot of companies that are going to have to bring new people on board and are going to have to purchase new systems and processes. So that’s significant,” said Mohin, of climate-accounting startup Persefoni.

If enacted, the SEC’s measure would be a victory for President Joe Biden’s largely stalled climate agenda, a point agreed upon by critics and supporters alike.

After the commission responds to the comments submitted, it will draft a final rule which will need approval from a majority of the 4-person commission.

“It is a really important piece in how the Biden administration is thinking about climate policy,” said Peloso of Vinson & Elkins. She said that would likely motivate the commission to finalize it by the end of the year.

  • Associated Categories: U.S. News, Associated Press (AP), AP National News, AP Online National News, Top U.S. News short headlines, Top General short headlines, AP World News, AP Business, AP Business - Industries, AP Business - Utilities
© Copyright 2022
All rights reserved. This material may not be published, broadcast, rewritten, or redistributed without permission.
Companies weigh in on proposed SEC climate disclosure rule
The Securities and Exchange Commission is moving closer to a final rule that would dramatically change what public companies reveal about the risks posed by climate change to their operations
1:16PM ( 7 minutes ago )
Nicky Lopez loses to KC Royals in salary arbitration
Kansas City infielder Nicky Lopez lost his salary arbitration case with the Royals on Friday and will get $2.55 million instead of his $2.9 million request, a decision that clinched management’s third straight winning record
1:06PM ( 18 minutes ago )
McCartney marks 80th birthday with Springsteen, 60,000 pals
How better to celebrate an 80th birthday than by singing about “Glory Days” onstage with Bruce Springsteen, and being serenaded by some 60,000 well-wishers
12:57PM ( 26 minutes ago )
Associated Press (AP)
UK's Johnson: Russia taking 'heavy casualties' in Ukraine
British Prime Minister Boris Johnson said during a surprise visit to Kyiv that Russian forces ”taking heavy casualties” in their ongoing invasion of Ukraine
11:49AM ( 1 hour ago )
As Russia presses attack, Ukraine gets possible path to EU
The European Union’s executive arm has recommended putting Ukraine on a path to membership
11:39AM ( 1 hour ago )
WTO ministers reach deals on fisheries, food, COVID vaccines
World Trade Organization members have reached a string of deals and commitments aimed to limit overfishing, broaden production of COVID-19 vaccines in the developing world, improve food security and reform a 27-year-old trade body that has been back on its heels in recent years
11:30AM ( 1 hour ago )
AP World News
Stocks hold steady on Wall Street at close of a brutal week
Stocks are holding steady in afternoon trading on Wall Street Friday at the end of a brutal week
12:08PM ( 1 hour ago )
Report: Smoking bans no longer a threat to casino revenue
For decades, it was accepted wisdom in the casino industry that eliminating smoking would automatically lead to revenue declines and customer losses
11:39AM ( 1 hour ago )
Residents say China used health tracker for crowd control
Angry bank customers who traveled to a city in central China to retrieve their savings from troubled rural banks have been stopped by a health app on their cellphone
11:12AM ( 2 hours ago )
AP Business
Wall Street opens gingerly higher at end of a brutal week
Stocks are opening gingerly higher on Wall Street Friday at the end of a brutal week
9:44AM ( 3 hours ago )
Costa Rica chaos a warning that ransomware threat remains
Costa Rica has been reeling from unprecedented ransomware attacks disrupting everyday life in the Central American nation for the last two months
7:20AM ( 6 hours ago )
Takeaways from AP interview: Biden on inflation, US psyche
President Joe Biden sat down with The Associated Press to discuss the state of the economy, his concerns about the national mood and his commitment to standing up to Russia’s aggression in Ukraine
7:13AM ( 6 hours ago )
AP Business - Industries
Germany steps up calls to save energy as Russia reduces gas
Germany’s vice chancellor is stepping up an appeal for the country's residents to save energy after Russia’s Gazprom announced significant cuts in natural gas deliveries through a key pipeline
4:10PM ( 21 hours ago )
Residents improvise as Texas city rushes to turn water on
Residents of the West Texas city of Odessa have been improvising emergency water supplies after a water system outage left them high and dry for days amid scorching heat, even as utility crews scrambled to restore normal service
6:06AM ( 1 day ago )
World shares mostly lower as US rate hike relief rally fades
Global shares are mostly lower after the Federal Reserve raised its key interest rate by three-quarters of a point and signaled more rate hikes were coming to fight inflation
5:52AM ( 1 day ago )
AP Business - Utilities
Nicky Lopez loses to KC Royals in salary arbitration
Kansas City infielder Nicky Lopez lost his salary arbitration case with the Royals on Friday and will get $2.55 million instead of his $2.9 million request, a decision that clinched management’s third straight winning record
1:06PM ( 18 minutes ago )
McCartney marks 80th birthday with Springsteen, 60,000 pals
How better to celebrate an 80th birthday than by singing about “Glory Days” onstage with Bruce Springsteen, and being serenaded by some 60,000 well-wishers
12:57PM ( 26 minutes ago )
US sanctions Nicaraguan gold mining firm over ties to Russia
The U.S. has imposed sanctions on Nicaragua’s state-owned gold mining company and the president of its board of directors partly over the Central American nation’s ties to Russia
12:57PM ( 27 minutes ago )
French film titan Trintignant, of 'A Man and a Woman,' dies
French film actor and amateur race car driver Jean-Louis Trintignant has died at age 91
12:53PM ( 31 minutes ago )
US Open updates: Scheffler shoots 67, ties for lead
Masters champion and top-ranked Scottie Scheffler shot 3-under 67 to join Rory McIlroy and four others in the lead at the U.S. Open
12:51PM ( 33 minutes ago )