ASBN Stands Behind Proposed Rule to Enhance Climate-Related Disclosure Requirements

March 22, 2022  by Laurie Northington in Business Strategy, Industry   

The enhancement and standardization of climate-related disclosures is overdue and urgently needed to help investors and American businesses compete effectively in an economy that needs to move faster than it is today towards decarbonization. Under today’s governance, businesses and investors working to decrease or eliminate their impact on the climate crisis do not have a level playing field when it comes to reporting and assessing climate-related topics and validating suitable investment choices. Investors and business owners, and consequently their impact on the climate crisis, will benefit from greater transparency and accountability proposed by the SEC.  

Under the SEC’s proposal, U.S. companies would be required to have some of their carbon emissions included in regulatory filings. Scopes 1 and 2 greenhouse gas (GHG) emissions will need to be included in annual filings, such as 10-Ks. Additionally, indirect emissions will need to be included from upstream and downstream activities (scope 3), if material, or if the company has set a GHG emissions target or goal that includes scope 3 emissions, in absolute terms, not including offsets, and in terms of intensity. This type of Information about specific emissions is not standardized, if it is currently disclosed at all, and the SEC’s proposal for standardization is also helpful to improve transparency and verification. ASBN believes all three scopes are key, particularly scope 3, because they are the biggest and broadest components of a company’s impact on climate change for most sectors of industry.  

“ASBN will be issuing its own comment as well as encouraging its members and network to provide detailed input on the proposal and comment directly. Disclosure will support all companies being rightfully rewarded in the marketplace that perform authentically on ESG. We look forward to requirements being highly inclusive to allow all businesses, especially SMEs, to improve transparency and accountability throughout their value chains,” said  Ali-Reza Vahabzadeh, EVP, Membership of the American Sustainable Business Network and ESG & Corporate Transparency Working Group leader.  

“Investors and businesses need and deserve as complete a picture as possible of risks and opportunities, particularly as it relates to material issues that can span generations such as climate impact,” said Valerie Red-Horse Mohl, co-chair of ASBN and CFO of East Bay Community Foundation. “Our climate crisis is fused with racial and gender inequity and the wealth gap and demands transparency; all people and the environment will benefit from requiring it as part of our assessments.”  

"Corporate Directors owe fiduciary duties of loyalty, care, good faith, confidentiality, prudence, and disclosure to their corporate shareholders. The duty of care requires directors to inform themselves prior to making a business decision. The SEC's proposed rules to require companies to disclose climate related risks positions directors to fulfill their fiduciary duty of care as required under law given the vast amount of information that shows corporate transparency is beneficial to a corporation’s bottom line. The proposed rules are a good business decision that ASBN will advocate for on Capitol Hill and beyond," said Maritza T. Adonis, VP, Policy, Advocacy, and Government Affairs for ASBN.  

ASBN has been working to address serious and growing concerns about business activities which are unaccounted for, or currently escape disclosure as negative externalities, which at this point also do not affect the P&L or balance sheet of corporations. The proposed standards will also help to reduce greenwashing. Companies of all types that are advertising, marketing, drafting ESG statements, or disclosing information will be required to pay extremely close attention to the language used in all of these types of documents, or run the risk of SEC scrutiny.