May 12, 2022 - As previously reported, the SEC has proposed rules that would see the mandate of a slew of climate-related disclosures by reporting companies. The mammoth proposal – spanning more than 500 pages — was released on March 20th and industry participants were quick to request additional time to review and react to the proposal. Their entreaties were answered on Monday when the SEC extended the comment deadline to June 17th.
The LSTA is continuing to review the proposal and working on its response. One area that is will draw broad scrutiny is requiring companies to report their Scope 3 emissions (i.e. emissions from upstream and downstream activities in value chain). Concerns with this type of reporting run the gamut from significant expense and burden on companies, the liability associated with this disclosure, very little Scope 3 data exists today and disclosure would largely be estimates, and the risk of double-counting emissions. Furthermore, for bank reporting companies, Scope 3 emissions includes financed emissions which would see banks reporting the emissions data from companies to which they lend and give financing. Information that is not currently available in most cases – and information that it would be challenging for a bank to collect in any event. Similarly, where private companies are in a reporting company’s value chain, they may need to provide their emissions data. Further analysis of the proposal is forthcoming.