Analysis: Corporate America looks for leeway on U.S. climate disclosures

People leave the U.S. Securities and Exchange Commission (SEC) headquarters in Washington, DC, U.S., May 12, 2021. REUTERS/Andrew Kelly

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WASHINGTON/BOSTON, June 22 (Reuters) – Trade associations of major U.S.-listed companies have pushed back against a landmark Securities and Exchange Commission (SEC) proposal to require U.S. companies to disclose a range of emissions figures of greenhouse gases.

Groups such as the American Chamber of Commerce, the Bank Policy Institute, the National Association of Manufacturers (NAM) and the American Petroleum Institute (API) have asked the Wall Street regulator for more discretion in the details they provide to investors, according to public correspondence sent to the agency.

The scale of the pushback highlights the pressure the SEC faces to backtrack on at least part of its climate agenda, though how successful the companies may be in winning concessions remains to be seen. The regulator also saw a show of support for the rules. Read more

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The letters, dated this month, came in response to a proposed rule the SEC unveiled in March that would require public companies to specify their own direct and indirect greenhouse gas emissions, known as of “Scope 1” and “Scope 2” emissions. Read more

The measure would also require companies to disclose emissions generated by suppliers and customers, known as “scope 3” emissions, if they are material or included in the emissions targets the company has set.

This aspect of the rule has drawn some of the strongest resistance, including from a group of prominent investors.

The proposed rules “are broad and unprecedented in their scope, complexity, rigidity and prescriptive particularity,” wrote the Chamber of Commerce, the most powerful U.S. trade group. Among other things, he suggested that the declaration of scope 3 should be voluntary.

Comments on the proposal were expected on Friday and will inform the SEC’s final rulemaking, which some analysts expect by the end of the year. Many companies now make ESG – environmental, social and governance – disclosures under voluntary standards and taking into account developments in the European Union, where authorities aim to reduce net global warming emissions by 55 % by 2030 relative to 1990 levels. Read more

US President Joe Biden has said he wants to halve US greenhouse gas emissions by 2030 and achieve net zero emissions by 2050.

SEC Chairman Gary Gensler said the agency was responding to consistent requests for information from investors, who have poured some $7.5 billion into U.S. sustainable funds so far this year. Read more

‘A BADLY ADVISED MISADVENTURE’

The SEC rule could be subject to legal challenges on the grounds that its benefits do not outweigh the significant reporting costs, or that it is beyond the authority of the SEC, according to a comment letter from the professor of law from George Mason University, JW Verret.

Granted, the agency has also received a lot of support, including from US Democratic senators and the California Public Employees’ Retirement System, the largest US pension fund. He welcomed aspects of the proposal, including its call for companies to provide details on potential emissions reduction targets.

Some of the sharpest criticism has come from US Republican politicians, echoing other critics of ESG investing who say efforts to address environmental and social issues are best left to elected leaders, not corporations. . Read more

West Virginia Attorney General Patrick Morrisey and 23 other state officials, for example, have called the SEC’s proposed rule a “misguided misadventure in environmental regulation” that is legally indefensible and should be suspended.

Republican senators also pushed back against the SEC’s proposal, arguing that the measure would impose huge costs on the US economy.

LOOKING FOR ADJUSTMENTS

Major business groups have stopped short of calling for the rule to be scrapped, instead proposing changes to narrow its scope.

NAM suggested rescinding the proposed reporting requirements for Scope 3 and relaxing compliance with the reporting requirements for Scope 1 and Scope 2.

Such changes would “significantly ease compliance burdens and reduce investor confusion while preserving the spirit of the proposed rule,” he writes.

Although the API said it could not support the current proposal, it does support “timely and accurate reporting of GHG (greenhouse gas) emissions”.

Investors have largely backed the push for new climate disclosures as a way to clarify the current mix of corporate statements that can vary widely in detail and approach. Read more

The Investment Company Institute (ICI), representing major U.S. asset managers, said it supported key elements of the SEC’s proposal, including for Scope 1 and 2 disclosures, because metrics are now good enough to show investors “consistent and comparable information”.

But data gaps and methodological disagreements mean the SEC should drop its Scope 3 proposal, the ICI wrote.

“The SEC’s proposal should strike a better balance between ensuring investors get the information they need, without inundating them with inconsequential information,” ICI CEO Eric Pan told Reuters.

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Reporting by Katanga Johnson in Washington and Ross Kerber in Boston; edited by Simon Jessop, Michelle Price and Deepa Babington

Our standards: The Thomson Reuters Trust Principles.

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