https://thehill.com/opinion/energy-environment/600203-the-sec-tries-its-hand-at-climate-policy
The Securities and Exchange Commission’s (SEC) remit includes ensuring candor, honesty and transparency in what public companies tell investors. Yet it will spend the next few weeks and months trying to fool us into believing that its new 510-page proposal on mandatory climate disclosure is solely about protecting investors and has nothing to do with climate policy or achieving net zero emissions by 2050.
No one should be fooled.
Materiality is the governing principle of corporate disclosure requirements. In 2010, the SEC issued 29 pages of guidance on climate-change disclosures. With respect to what is now called climate-transition risk, the guidance requires that companies “should consider specific risks they may face as a result of climate change legislation or regulations and avoid generic risk factor disclosure that could apply to any company.”
This common-sense approach is now being superseded by an SEC-specified climate-risk reporting and accounting framework that will run in parallel with traditional financial reporting requirements, with its own verification and attestation regime necessitating the employment of legions of climate consultants.
At the heart of the SEC’s new climate-disclosure regime is quantification of a company’s greenhouse gas emissions, at three levels: those emitted directly as a result of its own operations (Scope 1); those emitted from generating the electricity it consumes (Scope 2); and those emitted by its suppliers and customers (Scope 3). “Greenhouse gas emissions in many respects resemble financial statement disclosures,” writes Commissioner Allison Herren Lee, who, as the SEC’s acting chair in March 2021, initiated the process that led to the current proposal. Such disclosures, she claims, provide “critically important insights into a company’s operations.”