Industry Warns Against Climate Disclosure Rules

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The oil and natural gas industry is pushing back against the US Securities and Exchange Commission’s (SEC) attempt to develop climate risk disclosure rules (OD May20'21). In comments filed to the SEC, the American Petroleum Institute (API) and individual companies focused on the issue of “materiality,” arguing that companies shouldn't be required to disclose information unless it would have a substantial impact on operations or earnings. The public comment period closed last week. The API raised the specter of litigation, saying that an action by the SEC that “seeks to impose a major new climate disclosure regime” without allowing companies to omit information they consider immaterial would “raise significant concerns about whether the SEC has strayed far beyond its authority.” The API’s head of policy, economics and regulatory affairs, Frank Macchiarola, went as far as to say such requirements could be unconstitutional because they could amount to “compelling speech” -- a violation of the First Amendment of the US Constitution. Individual companies like ConocoPhillips, Chevron and Enbridge also urged the SEC not to require disclosures that wouldn’t meet the usual test of what counts as “material.” Limited Scope The US oil and gas industry’s largest lobbying organization said if companies are required to disclose emissions, the SEC should focus solely on direct -- or Scope 1 -- emissions. Others in industry were less rigid, with representatives from the smaller American Exploration and Production Council saying the SEC should only require Scope 1 and 2 (operational) emissions. The SEC is under pressure from institutional investors, investment managers and activists to set firm rules. Ceres, for example, wants to see disclosure of Scope 3 emissions -- those resulting from the consuming a company’s output. The organization also wants the SEC to require companies to disclose their internal greenhouse gas price, if they use one; progress toward net-zero or other climate mitigation goals; and to break down capital expenditures so that investors can assess progress toward those goals. Investment manager Vanguard said the current process of using different reporting frameworks is an “ad hoc and cumbersome process” that “does not provide consistent comparable data for investors to effectively assess this risk.” Emily Meredith, Washington

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