Blackrock and others respond to SEC scope 3 reporting proposals

The biodiversity crisis has been gaining traction recently, and hopes were high that a summit in the Kenyan capital of Nairobi would deliver a draft global agreement to be ratified at the next biodiversity summit, known as COP15, this coming December in Montreal. However, the 1,000 negotiators from 150 countries were unable to finalise a draft, with only two out of more than 20 goals agreed. The areas where agreement have been reached are on knowledge and technology sharing, and promoting green spaces in urban areas. 

Reports from the summit have suggested that proposals have been watered down, wording of commitments made more vague, and timelines shifted from 2030 to 2050. Further talks may be convened before the Montreal summit, as the Nairobi meetings only took place due to a lack of progress at talks in Geneva in March. 

The Net-Zero Asset Owner Alliance, a body convened by the UN that includes more than 70 institutional investors, has published new research into what realistic carbon pricing should look like to ensure a path to net zero that aligns with the Paris Accord’s 1.5C goal. 

At present 25% of the planet’s carbon dioxide emissions have a price, and the Alliance contends that in general these are too low to have sufficient impact on emissions. Some estimates put the average carbon price as low as $3 per tonne. This contrasts with the UN High-Level Commission on Carbon Prices, which recommends that the average should in fact be somewhere above $50, and perhaps as high as $100 per tonne if the Paris accord targets are to be achieved. 

 

The world’s largest asset manager, BlackRock, has put together a number of responses to proposals announced recently by the US Securities and Exchange Commission on climate-related disclosure regulation. The new SEC rules will, for the first time, require companies to provide information on climate risks and how they will counter them, and to report on scope 1, 2 and 3 emissions. 

BlackRock is broadly in agreement with the SEC’s proposals, but argues for closer alignment with the position of the Task Force on Climate-Related Financial Disclosures, which in some cases has less onerous reporting requirements than those the SEC is proposing. BlackRock says that for scope 3 reporting, a ‘comply or explain approach’ would be preferable to the mandatory complete scope 3 reporting for which the SEC has advocated. 

Other groups that have commented on the SEC’s reporting proposals, according to Reuters, include the US Chamber of Commerce, the Bank Policy Institute, the National Association of Manufacturers and the American Petroleum Institute. These organisations have all called for more discretion for companies in terms of the level of detail they need to provide investors with. The Chamber of Commerce has highlighted some of the challenges in reporting on scope 3, and has proposed that this should be voluntary. The SEC is expected to review the feedback from stakeholders and finalise the rules over the coming months. Experts expect the final draft by late 2022 at the earliest.