ABA calls for significant changes to SEC climate risk disclosure framework

Warning that the agency is going far beyond its mandate, the American Bankers Association today week urged the Securities and Exchange Commission to significantly revise—or withdraw altogether and repropose—its extensive climate risk disclosure framework for public companies. The proposal requires disclosure of a registrant’s direct GHG emissions (scope 1), indirect emissions from purchased energy (scope 2) and indirect emissions from activities upstream and downstream in a registrant’s “value chain,” if material (scope 3, which would include “financed emissions” in a bank’s lending portfolio).

In a comment letter responding to the proposal, ABA noted that “these requirements go far beyond the SEC’s mandate to protect investors,” and emphasized that “new standards for climate-related disclosures and accounting must conform to the long-held definition of materiality and also be scalable to the size and complexity of the registrant.” ABA added that given the nascent state of climate risk management, existing greenhouse gas accounting guidance, practices and metrics are limited. With this in mind, “a final rule must limit disclosure requirements for Scope 3 emissions . . . and sufficient safe harbors and transition time must be provided,” the association said.

ABA urged the SEC to replace its proposed framework with one that is “principles-based and scalable” depending on a company’s size, business model, industry, how its products or services fit into its value chains and the climate risks it faces. “Only with this flexibility will new, prospective and existing registrants be able to comply without significantly impairing their ability to compete in the marketplace,” ABA said.