Stock Groups

Investors say U.S. SEC climate disclosure rule to clarify ‘mixed bag’ of data -Breaking

[ad_1]

© Reuters. FILE PHOTO – Power-generating Siemens 2.37 Megawatt (MW), wind turbines can be seen at Ocotillo Wind Energy Facility. This aerial shot was taken above Ocotillo (California, USA), May 29, 2020. RE

By Ross Kerber

BOSTON, (Reuters) – Investors including many who manage environmentally-focused funds welcomed U.S. Government’s new rule regarding corporate disclosures of climate-related risk and emissions. It would standardize voluntary reports, which are often inconsistent in quality and breadth, and will help to reduce the variability and disparity between them.

Investors said that the U.S. Securities and Exchange Commission’s draft regulation would allow money managers to better assess how companies and industries handle the potential risks and rewards of a warmer planet.

U.S. ESG funds took in $71 Billion last year. That’s an increase of $51 Billion in 2020. Experts noted that investors have sought better data.[nL1N2SM2EH]

The final rule that the SEC might eventually adopt could be shaped by their responses to the draft.

Investors focusing on ESG issues have found it difficult to analyze corporate disclosures because they are not consistent.

Right now, you can find a variety of information from many different sources. “This should simplify how investors can view the data, and not only those who are focused on ESG investment,” stated Sarah Bratton Hughes of American Century Investments, Kansas City.

Dan Abbasi of Douglass Winthrop Advisors New York runs an environmentally-focused investment strategy that is worth $200 million. The proposed rules could also help fund managers choose companies that can benefit from the transition to lower carbon economies.

He stated, “It’s likely to give us more material to work with in regards to how management sees both the risks and how they are seizing them.”

This draft rule requires companies to reveal their direct and indirect greenhouse gases emissions. These are known as Scope 1 & 2 emissions and Supplier and Partner emissions. If material, Scope 3 emissions.

THERE IS A HUGE RANGE IN REPORTS

Gary Gensler, Chairman of the SEC stated that his commission is interested in simplifying reporting due to investor interest. Proxy solicitor Georgeson stated that 41 U.S. shareholders had submitted proposals calling for climate disclosures.

Gensler quoted a report that showed that only 65% Russell 1000 companies had published “sustainability plans” for 2019. But the report, by the Governance & Accountability Institute, found only around half of companies in some sectors like communications and finance published those reports, which companies organized using a range of frameworks.

Gary Levante from Berkshire Bank, senior vice-president of corporate responsibility, stated that “the reporting at the moment is all voluntary.”

He stated, “A mixed bag is the best way of describing it.”

CHALLENGES STILL AVAILABLE

Voting was 3-1 in favor of the rule, the only Republican on the commission being Hester Peirce. The Chamber of Commerce in the United States, which is the biggest business lobby, criticized the proposal as too restrictive.

At the opposite end, climate-focused activist investors supported the new rules, even though they preferred that the SEC require more Scope 3 disclosures.

“It is a fair rule. Scope 3 is difficult to measure. However, for some sectors such as the food sector it can indicate where their emissions lie,” explained Leslie Samuelrich, President of Green Century Capital Management.

Although the Investment Company Institute represents international investors, it generally welcomed the rule. However, it said that they will be “carefully studying” Scope 3 requirements.

Mark Gibbens of Erudite Capital in Kansas City, is an advisor to financial clients and also the CEO. Scope 3 reporting obligations companies may have to face, Gibbens said, are unlikely not to impact performance of the energy-focused ETFs, like the Energy Select Sector SPDR Fund.

He said, “I am not concerned.”

[ad_2]