An analysis of submissions made to the U.S. Securities and Exchange Commission reveals a sharp divide between the opinions of institutional investors and corporate executives when it comes to a proposal to standardize corporate climate disclosures.
“Comments from different parties did not always fall along corporates versus investors, though some did,” wrote Subodh Mishra, global head of communications at Institutional Shareholder Services Inc., in a post on the Harvard Law School forum on corporate governance.
The SEC’s proposal would require corporations to deliver climate-related information in a standardized manner. The approach is designed to be consistent with recommendations from the task force on climate-related disclosures, an organization founded by the G20 financial stability board in 2015.
The SEC received about 11,000 submissions during the comment period, far more than had been expected, according to Mishra. “[Roughly 6,250] form letter comments expressed full support for the rules, saying the disclosures are essential for investors to understand data about the impact on assets and the long-term climate outlook. . . . A further 3,000 form letter comments were supportive, referencing climate change disasters and suggesting the U.S. be brought in line with other countries’ disclosure regimes, particularly those in Europe.”
However, some corporations expressed concerns about the cost of complying with the draft regulations. Two major corporate associations, the Business Roundtable and the Chamber of Commerce, suggested the plan would be unworkable. Several other corporate submissions also questioned the regulator’s authority to mandate climate disclosures.
The most significant concerns related to the mandating of Scope 3 emissions disclosures. “Corporations and their trade organizations have often disagreed with investors about whether Scope 3 emission disclosures should be made at all,” wrote Mishra. “While some investors, such as [the California State Teachers’ Retirement System] 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.”
Other groups, including ones representing farmers, also provided submissions, despite being unaffected by the regulations. Mishra noted one particularly vociferous opponent, a rancher, wrote: “[It’s] un-American to socially ostracize or punish companies because they don’t adopt a radical leftist or environmentalist outlook.”
Among Canadian institutional investors, the proposals received a generally warm reception. In June, a joint submission in support of the proposal was released by the Alberta Investment Management Corp., the British Columbia Investment Management Corp., the Caisse de dépôt et placement du Québec, the Healthcare of Ontario Pension Plan, the Investment Management Corp. of Ontario, the Ontario Municipal Employees’ Retirement System, the Ontario Teachers’ Pension Plan, the Public Sector Pension Investment Board and the University Pension Plan.
“Doing this will unlock opportunities and mitigate risks, supporting our mandates to deliver long-term risk adjusted returns,” said the submission. “To deliver on our mandates, we need the disclosure of consistent, comparable and reliable information on climate change from companies.”