Apr. 21, 2023
TAN 875, at p 370, and page 370? It claims that pursuant to the GHGRP " direct emitters must report their emissions at the facility-level (not registrant-level)" Also, at p. 370, the release states: From the point of view of an investor seeking greater information regarding a registrant, the EPA’s emissions data may be difficult for investors to use, because the data are made public by facility and not by company. While each facility is matched to its parent company, this company may not be the entity registered with the SEC and thus of interest to investors. Taken together, the EPA emissions data is not well suited to enabling investors to fully assess the degree to which each registrant is exposed to transition risks. The problem here is that the Release emphasizes emitter level disclosures but fails to give much, if any, credit to the EPA's Parent Company reports. As the EPA explains: "Each facility subject to the GHGRP is required to report their highest level U.S. Parent Company(s) as part of their annual report. This file lists each facility's reported parent company(s) and percent ownership." See: https://www.epa.gov/ghgreporting/data-sets You will also find a link to the parent entity disclosures at that site. It is a simple spreadsheet exercise to identify the individual sources that map to a publicly traded entity and then aggregate them up. It's so easy that even I can do it. But, yes, the EPA's spreadsheet seems not to give you those aggregated numbers on a silver platter. Now, the proposing release's text at page 370 generates at least one problem and one opportunity, from my perspective. The problem is simple. How does the SEC know that the EPA data are insufficient? The release uses conditional language: "the company may not be the entity registered with the SEC." But given the EPA's aggregation rules, it could well most often be that entity. I don't know. The SEC or EPA might not know either. Determining whether EPA data correspond sufficiently to SEC registrant categories is a testable proposition. Has anyone at the SEC examined the data to determine the extent to which mismatches do or don't exist? The absence of such an analysis will be raised in objections to the rule proposal. If no one has tested the proposition, someone might want to get started on the exercise. The solution is equally simple. As we discussed, the first stage of a cooperative SEC-EPA initiative would, as I suggested, among other things, have the EPA make its reporting requirements, i.e., its "highest level" reporting requirements, consistent with SEC registrant definitions and reporting requirements. This coordination would promote consistency and efficiency benefitting investors, registrants, the EPA, and the SEC. Further, to the extent that the Commission should be looking for the lowest cost resolution of disclosure challenges, this would seem to be an obvious first step. Bottom line: 1. Don't speculate as to whether the EPA data map to SEC registrant categories with sufficient accuracy. Let's find out. The facts and data should be our guide. 2. Assure consistent mapping in all cases by having the EPA coordinate its aggregation rules with SEC reporting regimes, Note that this form of coordination will not change any of the costs associated with source measurements. It will only change the costs associated with roll up reporting rules. And, if the new rules follow the SEC's/GAAP roll up rules, compliance costs might even be reduced over time because reporting entities will know that they only have to apply one set of standards. Happy to follow up, and no problem making this part of the public record. Regards, Joe Professor Joseph A. Grundfest The William A. Franke Professor of Law and Business Senior Faculty, Rock Center on Corporate Governance Stanford Law School