The American Petroleum Institute (API) submitted comments on the U.S. Security and Exchange Commission (SEC) proposed climate-related disclosure rule, “The Enhancement and Standardization of Climate-Related Disclosures for Investors.” In its comments, API reiterated its support of timely and accurate reporting of greenhouse gas (GHG) emissions from all emitting sectors in the economy to address the risks of climate change through market-based solutions and appropriate government policy. However, the proposed rule’s expansive disclosure requirements would impose historic costs on companies across the economy, overwhelm average investors with information they do not seek, and could actually deter companies from taking steps such as setting GHG emissions reduction targets.
“The SEC’s proposed disclosure rule is a solution in search of an information problem that doesn’t exist. For more than a decade, our industry has been a leader in providing climate-related information, and we continue to improve the consistency and depth of that reporting in close collaboration with investors and other stakeholders,” said API Chief Advocacy Officer Amanda Eversole. “Ironically, the SEC’s prescriptive and inflexible proposal would likely lead to more confusion than clarity among investors, while imposing historic costs on companies and their shareholders. We respectfully urge the SEC to rethink its approach.”
In the comments, API states that the proposed rule is unlikely to achieve the SEC’s goal of providing more consistent, comparable, and reliable information to investors and urges the SEC to consider alternative approaches before finalizing any rule, including:
- The SEC should focus any disclosures on information that is material to the typical investor.
- The SEC should rescind the proposed requirements for disclosure of financial impacts of climate-related risks and opportunities.
- The SEC should recognize the inherent limitations with accurately reporting Scope 3 emissions and rescind the Scope 3 disclosure requirements. Companies should be allowed to determine whether to disclose Scope 3 based on their unique stakeholders’ needs. Industry initiatives like the API Guidance Document for GHG Reporting help improve voluntary Scope 3 reporting on a more comparable basis, and the SEC should allow industry-specific, stakeholder-driven initiatives to evolve and mature instead of mandating Scope 3 disclosures.
- To the extent the SEC requires the disclosure of information not traditionally considered material, the SEC should at a minimum provide necessary liability protections and allow companies to submit a separate climate-related report outside of the companies’ filed 10-K reports. The Commission should recognize the uncertainty and evolving state of climate-related information and strengthen safe harbor provisions as well as allow the issuers to furnish, rather than file, climate-related information. Climate-related information does not meet the level of precision of financial information that is currently included in registrants’ filings with the SEC. Similarly, the SEC should allow a longer phase-in period for the reporting and third-party verification requirements.
API’s comments are available here.