Jun. 17, 2022
June 17, 2022 June 16, 2022 Secretary Vanessa Countryman U.S. Securities and Exchange Commission 100 F Street, NE Washington, DC 20549 Re: Public Comment on Enhancement and Standardization of Climate-Related Disclosures for Investors Proposed Rule Release Nos. 33-11042 34-94478 File No. S7-10-22 Dear Secretary Countryman, On behalf of the Open Footprint Forum (OFP) we welcome the opportunity to respond to the Security and Exchange Commissions (SEC) request for public comment on its Enhancement and Standardization of Climate-Related Disclosures for Investors proposed rule (the Proposed Rule). OFP supports the SECs increased interest and initiative in the area of climate-related financial disclosure to meet investor information needs. Investors need comparable, consistent, and reliable disclosure of sustainability information over time necessary to inform investment and voting decisions. We believe that this need can best be met through the establishment of a global baseline of sustainability disclosure as proposed by ISSB, supported by an open standards reporting assurance framework and accelerated by deployment of cutting-edge technology underpinned by a common data model that will enable primary users of general-purpose financial reporting to assess enterprise value, which will advance investor protection, enable the maintenance of fair, orderly and efficient markets, and promote capital formation. The SECs Proposed Rule is a significant step toward achieving this global baseline. The Open Footprint Forum (OFP) is a global nonprofit organization in the Open Group, https://www.opengroup.org/openfootprint-forum, that offers resources to help businesses and investors develop a common data model to enable data exchange for GHG, and eventually wider ESG reporting. OFP has cross industry representation including industrial, commercial, technology and academic sectors. The OFPs resources include a Reference Implementation based on the Integrated Reporting Framework, the Sustainability Accounting Standards Board (SASB) Standards and recommendations of the TCFD, all of which are widely used by entities around the world. With these defined standards and an aligned underlying data model we can accelerate the journey to an operational reporting assurance framework. The OFP is working with ISSB to support the use of the global baseline once the final standards have been established from ISSBs first two proposed standards as published on 31st of March 2022: (1) the Exposure Draft IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information (the ISSB General Requirements Exposure Draft) and (2) the Exposure Draft IFRS S2 Climate-related Disclosures (the ISSB Climate Exposure Draft). OFP proposes an open central repository or Reference Implementation for the required climate exposure reports that enables required metrics (i.e. Scope 1,2,3 emissions, GHG Intensity, etc.) to be accessible by API. Eliminating barriers of access to sustainability reporting is critical to enabling companies to benchmark against each other and enable capital markets to accelerate change via competition. This would be in alignment with the CSRD proposal from the EU, which requires companies to digitally tag reported information so it is machine readable. (https://ec.europa.eu/info/business-economy-euro/company-reporting-and-auditing/company-reporting/corporate-sustainability-reporting_en eur02.safelinks.protection.outlook.com) The fragmentation of data fostered by the proliferation of reporting frameworks has multiplied the efforts of companies in meeting their reporting requirements and the IAC Recommendation focused on the inadequacies of ESG disclosures broadly, not just on those involving climate. The IAC Recommendation stated that, to the extent that SEC reporting obligations would require a single standard of material, decision-useful ESG information, as relevant to each issuer, and based upon data that issuers already use to make their business decisions, such an approach would level the playing field between well-financed large issuers and capital constrained small issuers. The IAC Recommendation noted that more than 125 third-party ESG data providers, including ESG ratings firms, have emerged to try to meet the informational demands of investors. According to the IAC Recommendation, these data providers are limited in their ability collectively to provide investors with comparable and consistent information as they use different information sources and different frequently opaque methodologies to conduct their analyses, which compromises the usefulness and reliability of the information. This current heterogeneity in practices and disparate demands from investors and ratings firms places a significant burden on companies asked to provide this information in a variety of formats. The IAC Recommendation further observed that many companies feel compelled to respond to the multiple surveys of ESG rating firms because ignoring them or refusing to respond can lead to a low rating, which can adversely affect stock price and access to capital. While the propo sed rules would not necessarily eliminate third-party questionnaires, they would help to provide standardized information to all investors and might reduce the need to obtain the information obtained through questionnaires. OFPs view is that developing and deploying a standard data platform can accelerate the creation of the digital infrastructure required to make this happen. Request for Comment Question 190: Should we require registrants to tag the climate-related disclosures, including block text tagging and detail tagging of narrative and quantitative disclosures required by Subpart 1500 of Regulation S-K and Article 14 of Regulation S-X in Inline XBRL, as proposed? Should we permit custom tags for the climate-related disclosures? Comment on 190: OFP support tagging and an allowance for custom tagging to manage the risk that it creates variations and inconsistency in reporting. Question 191: Should we modify the scope of the proposed climate-related disclosures required to be tagged? For example, should we only require tagging of the quantitative climate-related metrics? Comment on 191: OFP proposes to modify the scope of the proposed climate-related disclosures and their tagging requirements to address the risk that it creates variations and inconsistency in reporting as the qualitative measures may not be broad enough to meet the aims of high quality ESG reporting. Question 192: Are there any third-party taxonomies the Commission should look to in connection with the proposed tagging requirements? Comment on 192: OFPs standardized data model is an open-source third-party taxonomy to enhance the existing tagging requirements. Question 193: Should we require issuers to use a different structured data language to tag climate-related disclosures? If so, what structured data language should we require? Should we leave the structured data language undefined? Comment on 193: OFPs point of view is to use the current structured data language and enhance it with OFPs open-source standardized data model and allow for innovations in areas like blockchain and cloud computing take this further into the 21st century. Conclusion In summary, we support the SECs actions to improve climate disclosure, and we are encouraged that the SECs Proposed Rule is driving towards consistency in data standardization. This level of consistency represents a concrete step toward the establishment of a global baseline of investor-focused climate disclosures. Such a global baseline will reduce the reporting burden on preparers and provide investors with comparable, consistent, and reliable information about climate-related risks and opportunities and we are looking forward to collaborating with the SEC and others to make this happen. Sincerely, Johan Krebbers, Chair Sammy Lakshmanan, Co-Chair Arjen van de Voort, Member Ian Betts, Member