Jun. 14, 2021
Commenter’s Name: Tassos Stassopoulos
Organization: Trinetra Investment Management LLP
Commenter’s Professional Affiliation: Managing Partner & Chief Investment Officer
Mailing Address: 7 Stratford Place, London, W1C 1AY, United Kingdom
Phone Number: +44 20 3908 8901
Comments:
Question 1: The disclosure should form part of the annual reports or periodic filings and should be part of the management discussion section of the report.
Question 2: We believe that Scope 1, 2 3 emissions categorisation is sufficient, as it has become a de facto standard for GHG emissions measurement. Rather than simply reporting absolute numbers, we believe that companies could be encouraged to produce like-for-like figures since growing, or acquisitive companies, or shrinking companies, may not be given credit for improvements, or may be given unwarranted credit for them. This would, for example, be akin to retail companies that report on revenue growth, but then provide narrative around same-store-sales growth. This could reduce the risk that polluting divisions are sold to private equity and continue to pollute as opposed to keeping them under public markets scrutiny and improving their emissions profile.
Climate related risks, if material, have direct impact on the cost of capital. Traditional methodologies, such as CAPM, fail to account for this as they use backward-looking covariances of price movements as a proxy for forward looking risks. Provided that companies’ climate change impact disclosures are sufficient, then market participants can factor them into their own forward-looking risk assessments and can adjust the cost of capital accordingly.
Question 8: We believe that oversight should not be limited to compensation, but that the board should be required to show how considers climate risks, as well as how it delegates the management of those risks.
Question 9: We believe that standards need to be global in order to facilitate meaningful comparison. The standards do however need to be adapted to each industry to ensure that sectors with low exposure to climate change do not incur unnecessary costs to measure risks that are not material.
Question 15: We believe that it is critical that disclosures do just focus solely on environmental factors. Ultimately for the planet to be sustainable, we must provide a social foundation, a lower limit beyond which we should be obliged to aim to raise everyone on the planet to attain a just and fair world. The commission faces a risk that by focusing on only environmental disclosure, it could shift attention away from necessary social changes that have substantial positive impacts, but may also have environmentally negative outcomes.
Best regards
Tassos Stassopoulos
Managing Partner & CIO
Trinetra Investment Management LLP
7 Stratford Place, London, W1C 1AY
T: +44 20 3908 8901 | M: +44 7879430457
tassos.stassopoulos@trinetra-im.com | www.trinetra-im.com
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