Real Estate Coalition Submits Comments on Climate Disclosure Rule

NAIOP and a broad coalition of national real estate groups submitted a comment letter to the U.S. Securities and Exchange Commission (SEC) on its proposed regulation mandating public companies to disclose information relating to climate change, including material financial risks and their greenhouse gas (GHG) emissions.

The SEC’s proposed rule would, among other things, require companies to disclose GHG measures in three areas, called "scopes":

Scope 1: Direct GHG emissions that occur from sources owned or controlled by the company;
Scope 2: Indirect GHG emissions from purchased electricity and other forms of energy;
Scope 3: Indirect emissions from upstream and downstream activities in a company’s value chain.

Scope 3 emissions measures would require that companies obtain information from other entities, such as tenants, suppliers and vendors with whom they do business, and would require a third-party attestation of the information. As such, the SEC’s regulation would have broader impact beyond public companies, affecting private entities providing goods or services to public companies.

The coalition letter recommendations and comments include delaying the proposed compliance deadlines by at least one year (with Scope 3 emissions disclosures delayed two years because of the inherent difficulties related to their measurement); concerns regarding incorporation of climate-disclosure information within existing financial accounting frameworks, timing of disclosures, and expansion of safe harbor provisions for Scope 3 measures.

Concerns have been raised with the SEC’s proposal by Senator Joe Manchin (D-WV) and several Senate Republicans. The SEC is expected to respond to public comments and issue a revised regulation later this year.