Jun. 17, 2022
June 17, 2022 This is an important and thoughtful proposal that would elicit meaningful, comparable disclosures that investors need to assess climate-related financial risks. There are a few key areas that should be strengthened. Proposal Strengths Detailed qualitative disclosures around climate strategy, governance, and risk management consistent with the Task-Force for Climate-Related Financial Disclosures (TCFD), the most common voluntary reporting framework in use today Greenhouse gas (GHG) emissions reporting (Scopes 1 and 2), in absolute terms, not counting any purported avoided or reduced emissions, phased in over five years for most issuers (largest firms disclose for FY2023) with third-party assurance Incorporation of most disclosures into SEC filings (Form 10-K) Impacts of climate change and transition activities on consolidated financial statements (Regulation S-X) Details about scenario analysis and internal carbon prices If the issuer has adopted a transition plan as part of its climate-related risk management strategy, a description of the plan, including the relevant metrics and targets used to identify and manage any physical and transition risks If carbon offsets or renewable energy certificates (RECs) have been used as part of the issuers plan to achieve climate-related targets or goals, certain information about the carbon offsets or RECs. Opportunities to Strengthen Scope 3 (value chain) GHG emissions are only required if they are material as determined by the issuer, or if they have set a public Scope 3 emissions target. This should be made mandatory for all large registrants with reasonable assurance (Question 98). There is also a safe harbor from liability with no sunset that should be excluded in the final rule. Per the proposal, Scope 3 disclosures will be judged to not be fraudulent unless it is shown that such statement was made or reaffirmed without reasonable basis or was disclosed other than in good faith (Pg. 489). The proposal should incorporate more disclosures around environmental justice, just transition for dislocated workers, and community-level impacts (Question 15)