US regulator drops some emissions disclosure requirements from draft climate rules

Feb23,2024



US Securities and Exchange Commission (seconds) has eliminated some of its most ambitious greenhouse gas emissions exposure requirements from corporate climate risk It is preparing to adopt the rule, people familiar with the matter said Thursday.
SEC removes so-called Scope 3 disclosure requirement for US-listed companies emissionsSources said it was included in the original draft of the rules published in March 2022.
Reducing these rules would be a blow to President Joe Biden's agenda to address the threats of climate change through federal agencies. Biden, a Democrat, has been under pressure from many lawmakers in his party to do more and move faster.
Scope 3 emissions include greenhouse gases such as carbon dioxide released into the atmosphere from the company's supply chain and the consumption of its products by customers. According to consulting firm Deloitte, for most businesses, Scope 3 emissions represent more than 70% of their carbon footprint.
If adopted, the new draft would represent a victory for many corporations and their trade groups who lobbied to weaken the rules. But it would also deviate from EU rules that make Scope 3 disclosure mandatory for larger companies starting this year and potentially complicate compliance for some global corporations.
The SEC's original draft proposed mandatory disclosure of emissions for which companies are more directly responsible, referred to as Scope 1 and Scope 2. Some lobbyists pressured the SEC to require such disclosures if they are material to a company's business. Reuters could not find out whether the latest draft changed the Scope 1 and 2 requirement thresholds.
Once the SEC settles on a final draft, it must be put to a vote among its five commissioners. The timing of the vote is unclear, and it is possible that the draft may be revised before then.
The sources requested anonymity as the matter is confidential. An SEC spokesperson said the agency considered adjustments to its draft rules based on public feedback, but declined to comment on the content of the latest draft of the climate risk rules.
“The Commission moves to adopt rules only when the staff and the Commission feel they are ready for consideration,” an SEC spokesperson said.
The SEC's March 2022 proposal would require publicly listed companies to disclose a range of climate-related risks that could impact their business. It argued that disclosure of greenhouse gas emissions is important for investor due diligence. Companies have pushed back, arguing that the data is difficult to generate and legally controversial.
Reuters reported in November that the SEC had told lobbyists incorporated Officials were considering softening the rules.
Some SEC officials worry that mandating disclosures across the board could make the rule more vulnerable to legal challenges that, if successful, could tie the agency's hands when writing other rules, Reuters reported at the time. did.
Those concerns were boosted by a U.S. Supreme Court decision in 2022 that curbed the Environmental Protection Agency's power to regulate greenhouse gas emissions. This raised doubts about whether the SEC rules would survive a court challenge.
Some corporate groups and Republican lawmakers also argued that dealing with climate change-related issues exceeds the SEC's authority, and that the rules would be unnecessarily burdensome for companies and obscure information that actually matters to investors.
SEC Chairman Gary Gensler said at an event hosted by the U.S. Chamber of Commerce in October that he expected the emissions disclosure rule, which received nearly 16,000 public comments, would withstand any legal challenges once it is finalized and adopted. Will be saved from.
“I would expect that no matter what the rules say, unless they really reduce it in a tremendous way, there will be litigation,” Columbia Law School professor John Coffee, a securities regulation expert, said in an interview.
Last year, California adopted a law that will require companies operating in the state to disclose Scope 3 emissions beginning in 2027. Corporate lobbyists said companies would still be reluctant to disclose Scope 3 emissions in SEC filings, even if they produced them for California, because including such information in securities filings would open the way for more lawsuits from investors. Get basis.
Some voluntary initiatives such as the International Sustainability Standards Board already specify that disclosing Scope 3 emissions is best practice.
“There's no doubt that Scope 3 reporting is important, because otherwise you risk presenting a somewhat misleading picture of a company's greenhouse gas emissions,” said Ben Shiffrin, director of securities policy at Better Markets, a Washington, D.C.-based consumer and investor advocacy group. Let's take a risk.”



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