Mar. 31, 2022
After review and analysis of the SECs proposed rule amendment, I am in support of requiring domestic and foreign registrants to include certain climate-related information in its registration statements and periodic reports. While many companies release sustainability and corporate social responsibility reports, there is little requirement for accurate disclosure or standardization of reporting. Investors are entitled to have access to both consistent and reliable information regarding the climate-related risks of companies beyond falsified or skewed reports issued to please current and potential investors. Amongst the SECs core mission, protecting investors is at the forefront, which validates this proposal even further. As policymakers continue to put forth proposals to address climate issues, companies, especially those involved in energy-intensive industries, are likely to see a shift in their financials, which investors are entitled to be aware of. If policymakers efforts are enacted, companies will likely incur heightened costs in the form of a carbon tax. An illustrative report issued by EY, with a $25/ton carbon tax on all US energy-related CO2 emissions, predicts that across eight key industries comprising the US economy, a carbon tax could increase production costs by 0.7%. The electric power generation, which accounts for 34% of US energy-related emissions, would incur increased production costs of approximately 11.8%. In consideration of these proposed taxes, it is evident that these newly implemented taxes would lead to larger cash outflows and lower profits. Duke Energy, the largest publicly owned gas and electric utility in the US, publicized that it emits 209,931,000 MWh of energy per year, with 20.9% of electricity generated from higher-carbon oil and 37.1% from lower-carbon natural gas. While Duke Energy is taking extensive efforts to utilize carbon-free sources, the environment is still being harmed and will likely continue to be. As Duke continues its transition towards cleaner generation, significant investments and coal retirements will be needed. Updating its asset base will result in material adjustments to useful economic lives or write-offs, which should be disclosed for transparency. Significant investments in energy-efficient equipment will also lead to a negative impact on the profitability and an increase in the future obligations of the company. Therefore, the argument that this proposal falls outside of the SECs responsibility is false. The proposal is ensuring that the activities that companies are taking, will be taking, or are failing to take are properly communicated to investors. These disclosures will aid the public in making well-informed investment decisions while being aware of the impact companies are currently having on the environment. In light of growing environmental concerns, it is evident that authoritative action must be taken to hold corporations responsible. As a young citizen entering the accounting industry, I am excited to be a part of this revolutionary and necessary transition towards increasing corporations' accountability, while preserving our environment. If you are concerned with the validity of the information within this comment or looking to read more, the resources I found informative are listed below: https://sustainabilityreport.duke-energy.com/environmental/environmental-performance-metrics/ https://assets.ey.com/content/dam/ey-sites/ey-com/en_us/topics/tax/ey-how-key-industries-would-fare-under-a-carbon-tax.pdf