April 12, 2022
I am writing in support of S7-10-22 on behalf of the BankFWD network of individuals, families, foundations, and investors who are committed to sustainable climate finance. Our goal is to protect our financial assets as well as our global ecosystem by encouraging major US banks to phase out fossil fuel lending, financing and underwriting.
We welcome the mandatory climate disclosure rule as essential progress towards private sector transparency and responsibility. We particularly encourage the final form of this rule to require publicly traded companies to disclose all sources of greenhouse gas emissions including from their direct operations (scope 1), their indirect purchased energy (scope 2), and from across their value chains (scope 3) including their financed emissions related to investments as currently proposed.
The financial risks posed by climate change to investors, other market participants, and the economy are real, growing, cumulative and well documented by numerous government studies including the 2018 National Climate Assessment. Climate change threatens the value of investments across the board. From big money managers to anyone with a 401k or pension plan, investors deserve the full facts so they can make informed investing decisions.
For example, investors took huge losses when California utility PGE went bankrupt after its equipment sparked wildfires during a drought made worse by climate change. Volkswagen and Toyota's respective emissions scandals also highlight problems to investors that stem from non-disclosure. Outside the climate issue, 2008 crash is yet another major example of how financial risks when not disclosed and allowed to build up in the financial system can ultimately cause severe harm to investors.
S7-10-22 is necessary for index providers, credit rating agencies, banks and others who need climate information to make their business decisions. For example, climate information is critical for a bank assessing the credit worthiness of a company.
The SEC has long required disclosures in an effort to support investors, including disclosures about who runs a company, how much they get paid, and how much the company makes. Standardizing material risks from climate change is another step in providing investors and other market participants with clear, consistent, and comprehensive information so they can make informed investment decisions and can adequately price climate risk. This move by the SEC to require disclosure of financial climate risk is long overdue. The US Financial Stability Oversight Council has already endorsed climate risk disclosure by adopting a strong form of this rule the SEC will be following its own 2010 guidance and upholding its mandate to protect investors and ensure the proper functioning of markets and informed capital formation.
If adopted, this rule will reduce costs to investors and other market participants in trying to obtain this information from outside sources. Currently some climate information is being disclosed but it is incomplete, unreliable, widely variable, and expensive to obtain.
Furthermore, other countries are already requiring climate disclosure so the SEC is creating uniformity that sets an equal playing field for all businesses. Many are already disclosing, but lack of consistency means that businesses reporting transparently are incurring greater costs than businesses that are not.
Thank you for this opportunity to comment on a welcome breakthrough for investors.