Investors Seek Climate Data Excluded by U.S. Rules
Investors’ Demand for Indirect Greenhouse Gas Emissions Data
Investors are increasingly requesting companies to provide data on indirect greenhouse gas emissions, a category excluded by new U.S. financial disclosure rules, as stated by the International Sustainability Standards Board’s (ISSB) chair.
Scope 3 Emissions Importance
Scope 3 emissions, which include greenhouse gases from a company’s supply chain and product consumption by customers, are crucial. These emissions can represent over 70% of a company’s carbon footprint, highlighting their significance in environmental impact assessments.
Global Shift Towards Scope 3 Reporting
While the U.S. SEC decided to remove Scope 3 emissions reporting requirements, other jurisdictions like the EU and California are enacting laws mandating such disclosures. This global transition underscores the growing importance of assessing indirect emissions.
Investor Perspective on Scope 3 Reporting
Investors emphasize the relevance of Scope 3 emissions data, indicating its importance in their decision-making processes. Companies may face pressure to disclose this information voluntarily to meet investor demands.
SEC’s Evolving Stance on Emissions Reporting
The SEC’s decision reflects concerns about the reliability of methodologies for Scope 3 emissions reporting. While the regulator acknowledges the importance of such data, it suggests that the evolution of reporting standards is necessary to ensure accuracy and consistency.
Industry Response to SEC’s Draft Rules
Several companies and trade groups advocated for aligning disclosures with ISSB recommendations as an alternative to the SEC’s climate reporting rules. This indicates a broader industry preference for standardized reporting frameworks.
Scope 1 and Scope 2 Determination
The SEC’s flexibility in allowing companies to determine the materiality of emissions from their operations and purchased power (Scope 1 and Scope 2) reflects a shift towards more tailored reporting approaches. This approach enables companies to focus on the most relevant aspects of their emissions profiles.
