ISS’s “SEC Climate Disclosure Comments Reveal Diversity of Views” homes in on eight salient themes addressed in the reportedly representative range of comment letters it reviewed in response to the SEC’s climate disclosure proposal.
Key themes and select takeaways based on ISS’s analysis include.
- Corporate concerns over compliance costs and burdens in terms of time and money
Many market players expressed concern over the time and expenditure that would result from the current iteration of the SEC disclosure… The Society of Corporate Governance agreed with other commentators that the SEC underestimated the compliance costs. Wells Fargo said that including climate risk data in financial statements would increase expenses. NAM warned of particularly high costs for IPOs. Meanwhile, both State Street and BlackRock indicated that increased costs would constrain climate disclosure for corporate issuers.
- Questions over material relevance of the SEC proposals, including scenario analyses and whether data should be furnished or filed
Many comment letters emphasized that the SEC should focus on the Supreme Court’s precedent of requiring financial material disclosure as the determinative factor for their rulemaking. While disagreement remains over what information is material, certain disclosure requirements from the proposed rule were critiqued as being beyond the bounds of financial materiality.
- Diverse views on mandating Scope 3 emissions disclosures
While some investors, such as CalSTRS and Boston Trust Walden, requested that all Scope 3 emission data be disclosed in financial filings, many large corporate issuers and institutional investors expressed reservations about the availability of accurate Scope 3 data. Consequently, they suggested amendments to the SEC’s Scope 3 policy that ranged from making the disclosure fully voluntary to creating stronger safe harbors and longer implementation dates for companies to furnish or file the data.
- Broad support for board oversight of climate risks, but differences over granular disclosure requirements
Several market players took issue with the SEC’s decision to require disclosure of time spent discussing climate, as well as specific board members’ climate qualifications and responsibilities. Commenters including BlackRock, ICI, SIFMA, IIF and State Street said the SEC proposal overemphasized the role of individual members, while climate risk should be overseen by the whole board, even if it may include a climate expert.
- Additional themes addressed in the post include support for proposal’s alignment with SASB and the ISSB frameworks and strong support for the proposal’s alignment with the TCFD; concerns over the speculative nature of GHG disclosures/risks; and disagreement over the SEC’s scope of authority.
The post also notes that many commenters suggested alternatives to perceived problems with the proposal, including, e.g., providing for an extended period of time after the Form 10-K filing for the emissions data to be filed or furnished to the SEC, and exempting small, mid-sized, and newly acquired companies.
The Society’s comment letter addressed all of the substantive topics highlighted in the post, including SEC authority, materiality, costs, the use of the TCFD framework and SASB; Scope 3 disclosure, risk disclosure, and board oversight.
See our recent posts: “SEC Chair Gensler Touts Climate Disclosure Proposal,” “SEC Climate Disclosure Comment Letters,” “SEC Climate Disclosure Comment Letter Themes & Observations,” and “SEC Climate Disclosure Comment Letters,” and additional comment letters here.
This post first appeared in the weekly Society Alert!