Status of SEC’s proposed rules for more climate disclosure

This Reuters article gives us a status check on where we stand regarding the SEC’s forthcoming rule proposal to elicit more climate disclosure. My ‘tea leaves’ reading of the piece is that we will see it between one to three more months. According to the article, the biggest sticking point is what to propose regarding Scope 3 emissions disclosure – here’s an excerpt related to that:

A major issue staff are struggling with is whether and how some or all companies should disclose the broadest measure of greenhouse-gas emissions, also known as “Scope 3” emissions, according to the sources and company and investor advocates.

Corporate greenhouse-gas emissions fall into three buckets: Scope 1 are emissions a company generates. Scope 2 includes emissions it creates indirectly, for example by using electricity. Scope 3 includes emissions generated up and down the company value chain, including by suppliers and customers. Companies say there is no agreed methodology for calculating Scope 3 emissions and providing that level of detail would be burdensome.

Disclosing second-hand emissions data from suppliers and partners could also expose companies to litigation by both the third parties and investors, if the information transpires to be misleading, they say.

“The biggest point of contention is with Scope 3 emissions. … the agency is asking companies about activities that are outside of the firm’s control,” said Tom Quaadman of the U.S. Chamber of Commerce which is in discussions with the SEC on the issue. “American companies can get sued on detailing those things.”

Some inside the SEC are sympathetic to companies’ concerns and staff are exploring whether Scope 3 disclosures could fall under an existing legal safe harbor that protects companies’ forward-looking statements, or whether a new safe harbor could be created, the sources said. Steven Rothstein of investor advocacy group Ceres, which is pushing for Scope 3 disclosures, said SEC staff contacted them in recent months seeking more feedback on Scope 3 issues, including whether to provide a safe harbor.

Another option on the table to reduce companies’ legal exposure would see them publicly disclose Scope 1, 2 and some Scope 3 data, while filing sensitive Scope 3 data on suppliers and partners to the SEC privately, according the sources. “The agency is trying to determine whether they should be part of the company’s financial filing or can be provided or furnished separately,” said Tracey Lewis, policy counsel on climate for Washington group Public Citizen who has also discussed the matter with the SEC.

Mandating some Scope 3 disclosures would see the United States go further than Europe and voluntary standards from the Task Force on Climate-Related Financial Disclosures. That group, created by the G20’s Financial Stability Board, proposes companies disclose Scope 3 emissions if material and appropriate. A spokeswoman for the taskforce said it “strongly encourages” all organizations to disclose Scope 3 emissions.