The Latest on SEC’s Climate Proposal
- Yesterday’s final tally for comments submitted to the SEC on their climate disclosure proposal was 14,247! This number is much larger than other counts because I include the form letters (10,595 individual form letters across 28 letter templates) along with the 3,658 individual letter comments. Even though the deadline for submitting comments was last week, it is quite possible more will be published on the SEC public comment webpage in the coming days.
- One letter, which Liz blogged about last week, is getting much attention. This letter – from a bipartisan group of 18 former top S.E.C. officials and legal experts – stands up for the agency’s power to make the climate disclosure rules. An earlier letter from a group of 22 law and finance professors from 17 universities argued that “SEC’s recent proposal to impose extensive mandatory climate-related disclosure rules on public companies (the ‘Proposal’) exceeds the SEC’s authority”.
- Over on TheCorporateCounsel.net, John Jenkins gave a little teaser about his views on drafting our soon-to-be-released model disclosure. John, Dave Lynn and I are knee-deep in developing this and as John says we are already learning a few things. More on that – including the sneak peek at the model disclosure itself – is on the agenda of our free July 13th Climate Disclosure Event. Don’t look to me for any spoilers.
Speaking of climate risk management – a surprise may be in store for companies that are expecting Scope 2 emissions to improve through power utility fuel switching – especially in the UK and Europe. Bloomberg reports that “the UK now aims to keep a reserve of coal-fired plants available this winter rather than shutting almost all of them over the next three months as planned.” Germany is contemplating similar action. These unanticipated actions are due to inflation and the war in Ukraine: “While the [UK] only imports 4% of its gas from Russia, the market is exposed to prices in Europe where cuts to flows along a key pipeline are driving huge spikes in costs.” Who’da thunk we’d see coal use spike in the second half of 2022? I’ve warned many times before about real world volatility with regard to corporate climate risk management assumptions – we can’t seem to get off that carnival ride.
ESG Fraud Goes Mainstream
The Association of Certified Fraud Examiners (ACFE) in conjunction with GrantThornton published “Managing Fraud Risks in an Evolving ESG Environment“. The report states:
For corporations, ESG factors have quickly become as important as financial metrics. With this rapid rise to prominence comes increased pressure and wide opportunity for exploitation. Organizations need to take stock of their ESG programs, update their reporting standards, enhance their controls, and establish capabilities to mitigate ESG-related fraud risk.
Of course I am biased, being a former member of ACFE, a big fan of theirs and something of an ESG fraud nerd – but this document is worth reading. Not only does it discuss ESG in the Fraud Triangle framework, it also links ESG to the COSO/ACFE Fraud Risk Management Guide. And don’t forget about my recent podcast with Chris McClure of Crowe on fraud detection in ESG.
Uyghur Forced Labor Prevention Act Importation Ban Starts
Yesterday was the statutory beginning of US importation prohibitions on goods and materials from the Xinjiang Uyghur Autonomous Region (XUAR) under the US law passed last year. US Customs and Border Protection published operational guidance for importers and the accompanying strategy to prevent importation of covered goods. Together, these documents set forth the requirements importers need to follow to rebut the presumption that goods mined, produced or manufactured in the People’s Republic of China used forced Uyghur labor and are therefore prohibited from importation into the U.S.
Although the law and related documents address cotton, tomatoes and polysilicon as “high priority sectors for enforcement,” the law is not limited to those and applies broadly to any goods mined, produced or manufactured in the People’s Republic of China. The requirements as laid out in the operational guidance for rebutting the presumption are comprehensive to the point of being potentially burdensome – and may involve public disclosure of sensitive commercial information.
We are in the process of developing a checklist that combines and simplifies these critical documents. I will announce its availability (exclusive to PracticalESG.com members) once it is published.