In June, the Electric Power Research Institute (EPRI) submitted a comment letter to the Securities and Exchange Commission’s (SEC) comment docket that included their broader observations which assessed the scientific relevance of the SEC’s disclosure rule pertaining to company-level climate risk assessment.
Their research helped identify the necessary facets needed for the climate disclosure rule to be effective and develop and communicate meaningful climate risk and risk management information.
Interestingly, EPRI concluded that Scope 3 emissions would be quite a challenge to quantify and track, specifically surrounding the reporting factors:
“Given the nature of Scope 3 emissions and the accounting guidance provided by existing GHG accounting standards, it is very likely the same GHG [greenhouse gas] emissions will be double counted and reported by multiple registrants. For example, an electric utility that uses natural gas to generate electricity will be in the same value chain as the natural gas producer that produced and supplied the natural gas and the pipeline that transported that natural gas to the utility’s power plant. In this example, each of these three entities (i.e., electric company, natural gas supplier and natural gas pipeline), and with each reporting the emissions of the other within its Scope 3 metrics. […] GHG emissions are not a meaningful risk metric, and a variety of technical issues suggest that company management of Scope 3 emissions is economically inefficient.”
The SEC’s climate disclosure rule requests that public companies of all sizes disclose their “climate-related risks” by tracking their direct and indirect impacts on climate and greenhouse gas emissions (GHG) to investors. This reporting would start with the first company of the value chain, all the way down to the consumer who would use the product. These companies would be required to track every step of the value chain and the exact emissions data that would surround their product on its journey downstream.
With the SEC’s unprecedented overreach into climate disclosure rules, the EPRI’s findings reiterate the idea that the SEC has stepped into an area in which they have no authority. The SEC’s climate disclosure rule will not only hurt businesses, but consumers who will have to pay the price for these unwarranted and insignificant reporting requirements that business must comply with.