Business worries that US climate regulations may require widespread disclosure of US climate rules

Author: Katanga Johnson

WASHINGTON (Reuters) – As US securities regulator drafts a new climate change rule, environmental campaigns and activist investors want companies to be aware of not only their greenhouse gas emissions, but also those generated by suppliers and other partners. .

Corporate groups, on the other hand, are calling for a stricter rule that will make it easier and more expensive to collect and report emissions data, and that will protect them from being prosecuted for potential errors.

Last year, the Securities and Exchange Commission (SEC) began work on https://www.reuters.com/business/sustainable-business/sec-considers-disclosure-mandate-range-climate-metrics-2021-06-23 It requires U.S. companies to provide detailed information to investors about how climate change can affect their business.

The rule is part of a broader effort by Democrat President Joe Biden’s administration https://www.reuters.com/business/cop/key-recommendations-us-treasurys-financial-climate-risk-report-2021-10-21. Addressing the challenges of climate change and reducing greenhouse gas emissions by 50-52% from 2030 levels by 2030, an ambitious commitment https://www.whitehouse.gov/briefing-room/statements-releases/2021/11/01/fact -sheet-president-renewing-us-leadership-on-world-stage-at-a-climate-conference-cop26, which will require each federal agency to do its part.

Progressives and Climate Campaigns Want the SEC to issue a game-changing rule that will expose all emissions responsible for a company, and many investors https://www.reuters.com/business/blackrock-warns-heavy-polluters- excessive emissions data-before-shareholders-meeting-2021-02-2021 said that these data are needed to fully assess companies’ exposure to climate change and related policy measures.

Initially, the SEC under President Gary Gensler said it expected to release a draft in October 2021. Last month, Gensler said he planned to release a draft in early 2022.

The two workers, who are familiar with the matter, said that the staff were working on the rule, and that the SEC commissioners, who must vote to propose the rule, had not seen the draft.

An SEC spokesman declined to comment.

An important issue facing employees is whether or not some companies should disclose the widest range of greenhouse gas emissions, also known as “Scope 3,” according to sources and advocates for the company and investors.

Corporate greenhouse gas emissions are divided into three groups: Area 1 is emissions generated by a company. Area 2 includes indirect emissions, such as electricity. Scope 3 includes emissions generated up and down the company’s value chain, including suppliers and customers.

Companies say that there is no agreed methodology for calculating emissions in Area 3 and it would be cumbersome to provide this level of accuracy.

Disclosing second-hand emissions data from suppliers and partners could result in lawsuits against third parties and investors if the information is found to be misleading.

“The biggest debate is with the Scope 3 emissions. … the agency is asking companies about activities that are beyond the control of companies,” said Tom Quaadman of the U.S. Chamber of Commerce, and the issue he is discussing with the SEC. . “U.S. companies can sue for these things.”

Some SEC insiders agree with the company’s concerns and are investigating whether Scope 3 disclosures may be within a legal shelter that protects future business statements, or whether a new safe harbor may be created, sources said.

Steven Rothstein, of the Ceres investor promotion team, who is pushing for the Scope 3 outreach, said SEC staff have been in contact with them in recent months to seek more views on Scope 3 issues, including whether or not to provide a safe harbor.

Another option on the table to reduce the legal exposure of companies would be to publicly disclose some Area 1, 2 and 3 data, and while Area 3 sensitive data on suppliers and partners is privately filed with the SEC, according to sources.

“The agency is trying to determine whether they should be part of the company’s financial file or whether they can be provided or provided separately,” said Tracey Lewis, Washington’s Public Citizen climate policy adviser, who also discussed the issue with the SEC.

SECTORS IN THE SECTOR

The promise of some Scope 3 outreach would go beyond the United States and the voluntary standards of the Climate-Related Financial Outreach Task Force.

The group, set up by the G20 Financial Stability Board, proposes that companies report emissions in Area 3, if applicable.

It is unclear whether the two Republican commissioners of the SEC will support the move, even if Democrats have enough votes to push through the draft rule. Hester Peirce, one of the two Republicans, has suggested that https://www.sec.gov/news/speech/peirce-chocolate-covered-cicadas-072021 disclosure of emissions data is the domain of the Environmental Protection Agency.

A major challenge for the SEC, experts say, is to identify Scope 3 measures that help investors measure the company’s financial opportunities, and ensure that the rule is flexible enough to generate accurate, non-generic information.

While emissions reporting may be important for carbon-intensive sectors, for sectors such as oil, gas and automotive, it may be so important for others, and the SEC is looking at how much detail companies need to provide to the sector, people said.

Some high carbon companies include ExxonMobil (NYSE 🙂 Corp. major oil https://www.reuters.com/article/us-exxon-mobil-carbon/exxon-mobil-under-pressure-on-climate-aims -to-cut-emissions-intensity-by-2025-idUSKBN28O1TL, have recently begun reporting Scope 3 emissions amid pressure from investors and the pressures of the climate campaign.

The SEC is also looking at how much data should be disclosed to financial institutions that fund the carbon-intensive industry, people said. Many banks are ultimately committed to reducing emissions to zero, which could have a significant impact on their operations, they noted.

Rothstein said the SEC also asked him if he should introduce scope 3 for large, high-income companies, and then gradually introduce small and medium-sized companies a year or two later.

“Scope 3 is critical of any kind of disclosure and we expect the SEC to be bold,” he added. “The climate crisis needs no less.”