NIRI Position on Climate Change Disclosures
NIRI and its members believe that the SEC should not mandate climate change disclosures unless such disclosures—including the reporting of Scopes 1, 2, and 3 emissions—involve material climate- related risks and impacts.
Instead of requiring every public company to calculate its Scope 1 and Scope 2 emissions, the SEC should: • Require all companies filing GHG reports with the EPA to provide those reports in their next 10-Q or 10-K filing;
• Require companies that have identified Scope 1 and Scope 2 GHG emissions that are material to their business operations and/or financial condition and are not disclosed in reports to the EPA, to calculate and disclose such Scopes 1 and 2 emissions using a broadly accepted disclosure framework; and
• Initiate a cooperative process with the EPA, using the EPA’s authority under the Clean Air Act, to adjust its existing reporting regime to integrate with the SEC’s reporting process for companies with material Scope 1 and Scope 2 GHG emissions.
NIRI prefers that Scope 3 disclosures remain voluntary, as well as the attestation of Scope 1 and Scope 2 emissions data. • SEC Proposed Rule:
www.govinfo.gov/content/pkg/FR-2022-04- 11/pdf/2022-06342.pdf
• NIRI Comment Letter:
www.sec.gov/comments/s7-10-22/s71022- 20132552-303094.pdf
The SEC Climate Proposal Te SEC’s climate disclosure rule has been proposed but is currently in the negotiation and internal debate phase prior to its adoption, leaving the business community in anticipation. It is a significant step in addressing climate-related risks and providing transparency to investors. Te proposed rule com- prises these key components: • Greenhouse Gas Emissions: Companies would be required to disclose their greenhouse gas emissions, specifically Scopes 1 and 2. Larger companies would also need to disclose Scope 3 emissions if Scope 3 emissions are material or the company has established Scope 3 emission reduction goals.
niri.org/ irupdate
• Narrative Disclosure: A crucial aspect of the proposed rule is the requirement for companies to provide narrative disclosures aligned with the Task Force on Climate-Related Financial Disclosures (TCFD) framework. Tis disclosure should encompass details about the company’s governance structure for managing climate-related risks, its strategy for addressing climate-related financial risks, how it identifies and addresses such risks, and the metrics and targets used for assessing and managing climate-related risks, including its carbon footprint.
• Financial Statement Note: Companies would be required to include a note to their financial statements detailing the impacts of climate change if the impact is 1% or more of a specific line item. Te SEC’s approach aims to provide a standardized framework for reporting on
climate-related financial risks, responding to the industry’s plea for clarity amid the current landscape of varied ESG disclosure standards. Tis move towards
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