Wall Street | Listed companies will have to estimate their climate impact

(New York) Companies listed on Wall Street will be obliged to communicate data on their greenhouse gas emissions as well as their exposure to climate risks, under a new regulation adopted Wednesday by the American markets regulator financial institutions, the SEC.

Just a few hours after the adoption of the text, prosecutors from nine states, all Republicans, announced that they were going to federal courts to have it invalidated, accusing the SEC of overstepping its prerogatives.

Under this regulation, companies will have to include in their annual report data on emissions resulting from their direct activities (known as “scope 1”) as well as energy consumption (“scope 2”).

The SEC, on the other hand, has renounced imposing the publication of information on so-called “scope 3” emissions, that is to say those of the company’s suppliers and consumers of the goods or services it produces. (upstream and downstream).

This last component appeared in the initial proposal, submitted for comments in March 2022.

According to the text, the application of which will be spread out from the fiscal year 2025, companies listed in New York will also have to report climate-related risks and their effects, proven or potential, on their strategy, their economic model and their forecasts.

Other necessary information: the costs caused by climatic events, as well as expenses linked to possible purchases of carbon credits, which amounts to investing in projects reducing the consequences of greenhouse gas emissions.

Many companies already communicate on their climate impact and their actions to compensate or reduce it.

Ben Jealous, president of the Sierra Club, an influential American environmental protection organization, welcomed “a positive step forward”, but considered that the new regulations fell “significantly short of what would be necessary”.

“Scope 3 emissions (which are not included in the regulations) represent the vast majority of emissions from most companies,” he stressed on X. The Sierra club indicated that it was considering taking legal action to return to the initial version of the text.

Three of the five SEC commissioners voted in favor of adopting this rule following a public session.


The seal of the American financial markets regulator, the SEC

Among the opponents, Commissioner Hester Peirce pointed out that, according to estimates, these measures would increase the inherent costs of a listed company by 21% on average.

Thousands of small companies will be exempt from these obligations, another development compared to the first version of the text.

She also noted that data relating to the climate within a company remained “imprecise” and could not be compared to traditional financial and accounting data.

But for Gary Gensler, “this regulation offers investors coherent information, material for comparison and useful for decision-making,” said the president, quoted in a press release.

“Direct attack”

Prosecutors from nine states have announced that they will appeal to a federal appeals court to overturn this new directive, which West Virginia Attorney Patrick Morrisey called “an insidious maneuver to weaken the energy sector” in the United States.

“The SEC has nothing to do with climate change or energy,” insisted the magistrate during a press conference. “This is another attempt to implement a program without statutory prerogatives. »

The subject of environmental and social criteria (ESG) has become a battleground for some Republicans.

They believe that taking climate change into account in investment decisions goes against the long-term interests of clients.

Several Republican states have adopted texts allowing them to do without the services of companies using environmental criteria in their investment decisions.

Under pressure, several companies have reduced their public communication on the subject.

“In the United States, we are committed to the free functioning of the market,” said Patrick Morrisey, “and I have always viewed ESG standards as a direct attack on the market economy.”

The West Virginia prosecutor denounced the SEC’s desire to force companies to communicate on climate change when “people who work (on this subject) cannot agree” on a finding.

A study from Cornell University, published in 2021, showed that 99.9% of published research concluded that climate change was primarily caused by humanity.

reference: www.lapresse.ca

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