April 3, 2021
In Response to the SEC's \"Public Input Welcomed on Climate Change Disclosures\" Notice
This comment is to address the topic of informing investors on the risks of impacts due to climate change and impacts of companies on the climate.
According to the Fourth National Climate Assessment impacts are wide-ranging. The chapters of this assessment provide a framework for reporting potential risk due to climate change. Publicly traded companies with assets in or dependencies on water, forests, coastal assets, etc. should be providing guidance on each topic as it affects the company's ability to maintain current business and execute future plans.
However, the above paragraph represents an honor system, which has not always worked well. For companies with assets in the U.S. or other countries with codified environmental regulation, environmental impact statements with specific attention to the trend of a company's assets' impact in terms of level of degradation or sustainable, with options for offsetting degradation by a balance of repairs or mitigations of compromised landscapes are needed. These statements must come with demonstrated alignment with independent and authoritative studies. Authoritative meaning OMB A-16 Circular, or similar, assignment of authority for affected topics and contexts. For example the U.S. EPA provides information about impacted waters and water quality which should be used to demonstrate impact to, or improvement of local surface water. Similarly, the USGS, USDA, and state natural resource agencies report levels of and quality of groundwater which should be used. Not only used, but the agencies should be engaged when such information is missing or insufficient. It is also important to start and incentivize programs for restoring damaged landscapes, impaired waters, and to demonstrate improvements to the impacts of existing operations.
Such reporting is important because the condition of the landscape and waters affect weather which in turn becomes part of the evolving definition for a given region's climate. All IPCC CMIP general circulation models account for these factors when modeling future climates. A degraded landscape is warmer. A landscape that has too much water taken from natural systems is warmer and less ecologically diverse and therefore fragile, less resilient, and more likely to degrade further. Publicly traded companies have a moral and ethical obligation to account for their impact on the landscapes beneath, near, and downstream of their assets and activities.
Foreign investment that impacts the U.S. endowment of natural resources must also be represented. The concern is degradation, reduction, and permanent loss or loss of potential Water, Energy, Landcover, and normal functioning (both natural and anthropogenic) of U.S. sovereign lands and waters. Doing business with non-U.S. companies that do not report their impact to U.S. lands and waters must be discouraged, or even penalized.
Similarly, the practice of using LLCs and SPACs as a means to obfuscate responsibilities must be curtailed or eliminated. Too many companies find it too easy to create LLCs or invest in SPACs to engage in activities that damage landscapes while keeping this dirty business off the balance sheets of the publicly traded parent company. Long chains of ownership make it too onerous for authorities to enforce any given law. SPACs should be made illegal and LLCs should be limited to one per categorical purpose with the SEC responsible for a short list of purposes, i.e., research and development, publishing, etc. The idea that companies can own thousands of LLCs for transactional purposes is flawed and creates an easy means to avoid reporting and to do damage to the environment with impunity.
Finally, one must consider the purpose of the markets in the first place. Markets do not solely exist to create wealth. They exist to benefit society through the creation of wealth. When the wealth is concentrated in the hands of a few and not used to benefit the society of a people as defined nation or sovereign country, then that country is doomed to short existence and its people will suffer under growing hardships and misery. The SEC has the opportunity to additionally define its mission as ensuring the long-term prosperity of the United States of America. Confidence in our capital markets cannot be sustained when the companies in those markets primarily, and often solely engage in practices that singularly and in concert undermine the functioning of our environment and in turn our climate.