Last week, CIO Dive covered SEC Commissioner Mark Uyeda’s comments suggesting that the Commission re-propose the climate disclosure rule:
“Before publishing a final version of any disclosure rule, the SEC should determine the full range of costs to a company — including fees for attorneys and consultants — as well the commitment of time that could otherwise go toward improving profit … Broader disclosure may only benefit a minority of investors, Uyeda said.
‘A free rider problem exists when only a few investors desire such information, but the cost of disclosing that information is borne by all shareholders,’ he said. ‘The investors who did not seek the information are effectively subsidizing the investors who requested that information.’
The agency should also clarify whether investors seek the information in order to put a value on the company’s stock, he said.”
Cooley’s Cydney Posner has a more in-depth analysis of Uyeda’s comments that is worth reading.
If the SEC chooses to repropose the climate rule, relevant data is already in their back pocket. In 2011, Tulane University was asked by Senator Dick Durbin’s office to develop a detailed cost estimate for implementing SEC’s conflict minerals proposal.* Two other major cost estimates (one from the National Association of Manufacturers and the other from IPC – an electronics industry association) were submitted to the SEC. Tulane proposed a third model that pulled from both, as well as SEC’s own original cost estimates set out in the proposal. The Commission found Tulane’s estimates, explanations and assumptions to be credible and transparent and they accepted most key aspects of the Tulane report. Today, with 10 years of hindsight, many of those assumptions and expectations have generally borne out.
Other matters relevant to climate disclosure that are addressed in the SEC’s economic analysis of the conflict minerals rule (Section III.D.) include:
- Views on quantification of “compelling social benefits,”
- Recognition that “non-reporting companies are part of the supply chain or reporting issuers and will bear many of the compliance costs” and
- Impacts on capital formation/allocation resulting from the disclosure.
It’s worth taking a look back at the Tulane study and preamble discussions in the conflict minerals final release for insights into what may be in store for implementing a final climate disclosure rule or its potential reproposal. Companies subject to the conflict minerals rule should evaluate how to leverage your conflict minerals program for climate matters. I’m certain you will find opportunities to build off your existing processes and procedures. For more information on this, we have a 6-part podcast series discussing this – the first installment is here.
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* Due to circumstances at the time, my participation in the Tulane study could not be public. However, that is no longer the case.