Oct. 03, 2022
October 3, 2022 I make a living advising commercial customers on energy management solutions. In 2009 when I started my company, going green was thrown around by larger entities to get brownie points for being environmentally conscious. Many of them bragged about going green, when all they did was purchase RECs to offset their emissions. Now, Im not saying dismissing the purchase of RECs to go green, what I am saying is they viewed the image of being environmentally conscious as most important because it helped their business. The key word here is image. Today, companies still brag on their carbon footprint and the plans they have of becoming more energy efficient. Consumers and investors care about the environment now more than ever and it is only right that companies are required to come forth more detailed information about their carbon footprints. The Enhancement and Standardization of Climate-Related Disclosures to Investors provides a baseline requirement for disclosing climate-related information about a companys intentions of becoming energy efficient. It requires the companies to define their goals and report on the progress. It also requires the to report on GHGs which is directly related to the CAA. So a potential investor can not only see just how a company is performing to goal, but they can also be made aware of the companys efforts on following regulations of the CAA. A conscious investor can do their due diligence and determine how the company measures up to the CAA restrictions. This is certainly important from a risk perspective. No longer will companies be able to boast about their carbon footprint without explaining details. The Enhancement and Standardization of Climate-Related Disclosures to Investors will remove the social image aspect of climate-change and will hold more companies accountable for their approach to reducing greenhouse gases. This is a step in the right direction. The next step is to require companies to openly (public) report on their emissions and confirm that they are in compliance with EPA regulations. Most of the time, consumers dont hear about bad behavior until it makes the news. Lastly, the only reasonable argument against this new rule is there may be an added cost associated with producing more information as the rule requires companies to hire a third party to conduct the analysis. The argument lacks substance because they already spend money on the production on those reports. I would assume, if they are an investible company, they already pay for quite a bit if the information the rule is requiring. The rule will now require it to be made public.