Jun. 23, 2021
Dear Securities and Exchange Chair Gensler, Thank you for SEC's invitation to provide public comment on Climate Change Disclosures, which rightly identifies the urgent need for mandatory climate and environmental, social, and governance (ESG) disclosures. Unreliable content in ES&G reports undermines the trust in the markets that rely on the disclosures. Investors may want to invest in companies with individual profiles and therefore rely on the integrity of the reporting disclosures. Investors who wish to align their climate goals with their investment activity also seek to know the impact of the companies they are investing in the environment. We strongly encourage the SEC to include the concept of Double Materiality in their rulemaking. For instance, investors may want to base their investment decision on the "Principle of prudence" and not invest in companies with high internal GWP emissions related to specific emission types, such as significant HFC emissions due to poor operational performance. If these bad actors then purchase offsets because the cost of carbon offsets is more beneficial to the bottom line than the cost of fixing the leak, investors should know the type of company they are investing. Disclosures must: Be mandatory and standardized in a way that makes them comparable across firms and sectors. Be easily accessible, transparent, clear, and decision-useful to all investors across different levels of sophistication. Include both qualitative disclosures, such as the information currently reported under the voluntary Task Force for Climate-Related Financial Disclosures, as well as specific line-item, quantitative disclosures. Be published in annual and quarterly SEC filings, and to the extent possible, should be included in the audited financial statements. Include quantitative metrics and qualitative information about governance, strategy, and risk management. Cover 4 (four) areas of Risk that affect enterprise value, Physical Risk Financial Risk Compliance Risk – this is the impact that new regulations such as the phase-out of certain refrigerants will have on operational costs. For instance, conversion over the next ten years instead of the projected 39 years allowed under the straight-line depreciation could significantly impact a data center, hotel, or hospital's financial success. The Risk to society. Report on total greenhouse gas emissions (Scopes 1, 2, and 3) linked to their operations and their tier one suppliers. Many protocols conflict, but if the reporting company is required to report the process, investors would be aware of the possible gaps in the companies' reporting structure. Include quantitative and qualitative data used in scenario analysis regarding scope three emissions, specifically direct and supply chain emissions from land use, land-use change, and forestry. This data should include detailed data on company land banks, land and forest management practices, sustainability and governance policies, and deforestation-reduction targets. Be in a machine-readable format to allow academics and other stakeholders to easily We encourage the SEC to use their significant power to provide investors with the knowledge they need to invest that aligns with their principles and goals. No longer are financial KPI's the only benchmark used by the investment community. Therefore reliability in the ES&G disclosures is a needed set of KPIs that should have the same oversight as financial values. Have a Great Safe Day Ted Atwood tatwood@trakref.com