Reporting on Climate Risks – Page 2 – The Real Estate Roundtable

More than 10,000 Stakeholders—Including Members of Congress—Weigh in on SEC Proposed Climate Rule

Posted on June 24, 2022October 27, 2023 by Trey Jackson

Congressional lawmakers recently submitted comments to the U.S. Securities and Exchange Commission (SEC) regarding its proposed rule that would require all registered companies to disclose material financial risks related to climate change. Overall, the SEC has received about 10,000 responses on the climate reporting proposal. (AP, June 17, Wall Street Journal, June 21 and SEC docket with list of organizations and individual comments)

The Real Estate Roundtable submitted its comments to the SEC on June 10. (Roundtable Weekly, June 10)

Views from Congress, State AGs

More than 130 House Republicans wrote to SEC Chair Gary Gensler on June 15, asking him to rescind the climate disclosure proposal. “It is Congress’ job to set our environmental policy, not the job of unelected regulators,” according to the House letter. They have also called for a hearing on the SEC’s proposal. (E&E News, May 10)
A nearly equal number of House Democrats countered in their own letter, urging the SEC “to finalize the rule as quickly as possible.”
Over in the Senate, Republicans expressed their opposition in an April 5 letter.
Meanwhile, various Democratic Senators submitted several separate comments on June 17. One of their letters maintains that the proposal does not go far enough and should include a specific quantitative threshold for mandatory disclosures of Scope 3 emissions.
State Attorneys General have similarly expressed dueling opinions. (Democratic State AGs and Republican State AGs)

CRE Response

The Real Estate Roundtable’s June 10 comments were a focus of the June 17 meeting of The Roundtable’s Sustainability Policy Advisory Committee, chaired by Tony Malkin (Chairman, President and CEO of Empire State Realty Trust). (Roundtable Weekly, June 17)
Eleven national real estate industry trade groups, including The Roundtable, submitted a joint letter about the proposal on June 13.
Several of The Roundtable’s partner organizations also submitted individual responses. See letters from American Hotel & Lodging Association; Commercial Real Estate Finance Council; Mortgage Bankers Association; National Association of REALTORS; Nareit; National Multifamily Housing Council and National Apartment Association; and The Real Estate Board of New York.
The SEC received diverse perspectives across the spectrum of investor, environmental, business, and utility sector stakeholders, including letters from American Petroleum Institute, BlackRock, Business Roundtable, Ceres, Earthjustice, Edison Electric Institute, U.S. Chamber of Commerce, and World Resources Institute.
If the rule is finalized, compliance would phase-in over the next several years. All SEC registrants would be required to quantify their greenhouse gas (GHG) emissions and assess the economic impact of rising sea levels related to their assets through annual 10-Ks and additional filings. (SEC News Release | Proposed Rule | Fact Sheet, March 22)

The Biden administration is expected to push forward with a final rule that could be issued later this year.

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Roundtable Submits Comments to SEC on Climate Risk Disclosure Proposal

Posted on June 10, 2022November 8, 2023 by Trey Jackson

The Real Estate Roundtable submitted comments today to the U.S. Securities and Exchange Commission (SEC) on a proposed rule that would require all registered companies to disclose material financial risks related to climate change. The comments were developed with The Roundtable’s Sustainability Policy Advisory Committee (SPAC), chaired by Tony Malkin (Chairman, President and CEO of Empire State Realty Trust). (GlobeSt, March 22)

Extensive Climate Risk Disclosures

The SEC’s proposal, “Enhancement and Standardization of Climate-Related Disclosures for Investors,” is a key component of the Biden Administration’s efforts to cut U.S. greenhouse gas emissions. (CBS-AP | Bloomberg | Axios, March 21)
If the rule is finalized, compliance would phase-in over the next several years. All SEC registrants would be required to quantify their greenhouse gas (GHG) emissions, assess the economic impact of rising sea levels related to their assets, and report in SEC filings (for the benefit of investors) on these and other climate-related risks through annual 10-Ks and additional filings. (SEC News Release | Proposed Rule | Fact Sheet, March 22)
The SEC’s extensive draft rule has raised significant concerns throughout the U.S. business community. (ClimateWire, June 2). The proposal includes new disclosure requirements for “Scope 3” GHG emissions, which are generated outside a business’ direct control by partners, suppliers, and consumers that make up the “value chain” of that business. (EPA Scope 3 Inventory Guidance and Fourkites).

Roundtable Response

The Roundtable’s comment letter is summarized as follows:
- Registered Companies Should Not be Required to Report on Emissions From Sources They Do Not Own or Control.
  When applied to the CRE context, this means that a building owner should not be under a mandate to report on emissions attributable to the operations of tenants in leased spaces. For example, emissions from metered electricity in a tenant-leased space should not be the CRE owner’s responsibility to report to the SEC.
- Create a “Safe Harbor” for Emissions Calculated with U.S. Government Data and Tools.
  Reporting companies should be protected by a “safe harbor” that insulates emissions disclosures from liability—in both SEC enforcement as well as private litigation—when calculations are based on the best, available, and most recent data and tools released by the federal government.
- There Should be No Scope 3 Reporting “Mandate.”
  Scope 3 disclosures typically depend on GHG data possessed by suppliers and other businesses in a reporting company’s value chain. Registrants should not be under any Scope 3 disclosure mandate because they frequently cannot get the basic data to quantify those “indirect” estimates.
- Wait Until a Registrant has a Full Year of “Actual” Data Before Requiring Emissions Disclosures.
  The proposal as written effectively requires two separate emissions disclosures each fiscal year. The SEC should only require emissions filings once a year—after a company has all of the “actual” data it needs to support and verify its calculations.
- Financial Risks from Severe Weather Events Should be Subject to “Principles-Based” Reporting—As Opposed to One-Size-Fits-All “Prescriptive” Rules.
  Risks from floods, droughts, and similar events should be subject to narrative, “principles-based” reporting. The SEC should drop its proposed “prescriptive” rule that registrants should precisely quantify impacts from climate-related events if they have a one-percent or greater impact on any line item in a financial statement.

Policymaker Concerns

The Biden administration is expected to push forward with a final rule that could be issued later this year.
Senator Joe Manchin (D-WV), chairman of the Senate Committee on Energy and Natural Resources, sent a letter to the SEC on April 4 outlining his concerns with the proposal.
Senate Republicans also expressed their opposition to the SEC proposal in an April 5 letter.
House Republicans have called for a hearing on the SEC’s proposal—signaling heightened oversight should they win the majority in this November’s mid-term elections. (E&E News, May 10)

The Roundtable’s comments to the SEC will be a focus of the SPAC meeting on June 17, held in conjunction with The Roundtable’s Annual Meeting.

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Real Estate Roundtable Requests Member Feedback on SEC Climate Risk Disclosure Proposal

Posted on April 8, 2022March 8, 2024 by Trey Jackson

Monday, April 11 is the deadline for responses to a voluntary Real Estate Roundtable membership survey on a proposed rule issued by the U.S. Securities and Exchange Commission (SEC), above, that would require corporate disclosures of climate-related financial risks. (Roundtable Fact Sheet, March 25)

The responses will influence The Roundtable’s comments to the SEC about the March 21 proposed rule. (Roundtable Weekly, March 25)
Roundtable members are encouraged to review The Roundtable’s fact sheet summarizing the SEC’s proposed rule before submitting responses.
The survey, originally sent on April 1, aims to obtain a high-level understanding of the existing practices and standards used by Roundtable members in assessing and quantifying:

greenhouse gas (GHG) emissions across portfolios,

buildings’ electricity use,

the impact of floods and rising sea levels to real estate assets,

tenant interactions about these issues, and

other questions that may require registered companies to report on their climate-related financial risks.

The proposed SEC rule has no immediate effect. If it is finalized, the action could have a significant impact on the real estate industry, requiring all SEC registered companies to report on climate-related risks through annual 10-Ks and additional filings. (SEC News Release | Proposed Rule | Fact Sheet, March 22)

If any Roundtable member has questions about the survey, please contact Roundtable Senior Vice President and Counsel, Duane Desiderio.

Policymakers & SEC Regulation

Several Senate Democrats support a more stringent SEC climate disclosure rule, including Elizabeth Warren and Edward Markey of Massachusetts. (Politico, April 5 and Markey news release, March 21)
Senator Joe Manchin (D-WV), chairman of the Senate Committee on Energy and Natural Resources, sent a letter to Commission Chairman Gary Gensler on April 4 outlining his concerns with the 506-page proposed SEC rule.
A group of 19 Senate Republicans from the Senate Environment and Public Works (EPW) and Banking committees expressed their opposition to the SEC proposal in an April 5 letter to Gensler.
While some opposition to the SEC’s proposed rule is mounting in Congress, particularly from the GOP, the Biden Administration is nonetheless expected to push forward with a final rule that could be issued later this year.

The Roundtable’s Sustainability Policy Advisory Committee (SPAC) will convene a working group that will review the SEC’s proposed climate rule and our comment letter response to the Commission.

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SEC Issues Proposal for Registered Companies to Disclose Climate Risks; EPA Releases Emissions Calculator Tool

Posted on March 25, 2022October 27, 2023 by Trey Jackson

The U.S. Securities and Exchange Commission (SEC) issued an anticipated proposed rule on March 21 regarding the reporting and disclosure of material corporate financial risks related to climate change. (GlobeSt, March 22 and Roundtable Fact Sheet, March 25)

Expanded Climate Disclosures

The proposed rule has no immediate effect. If it is finalized, the action would require all SEC registered companies to quantify their greenhouse gas (GHG) emissions, assess the economic impact of rising sea levels relating to their assets, and report to investors on these and other climate-related risks through annual 10-Ks and additional filings. (SEC News Release | Proposed Rule | Fact Sheet, March 22)
Release of the proposal triggers a public comment period, with stakeholder input due to the SEC around May 20, 2022. Themes raised by The Real Estate Roundtable in pre-rulemaking comments submitted last year will likely be raised again in this latest round of public input. (Roundtable Weekly, June 11, 2022)
The SEC’s proposal, titled “Enhancement and Standardization of Climate-Related Disclosures for Investors,” is considered a key component of the Biden Administration’s efforts to cut U.S. greenhouse gas emissions by as much as 52% (below 2005 levels) by 2030. (CBS-AP | Bloomberg | Axios, March 21)

Scope 3 “Safe Harbor”

A Real Estate Roundtable Fact Sheet provides a summary of the 510-page SEC proposal, including the following elements:
- All companies registered with the SEC would be required to report and quantify Scope 1 and Scope 2 GHG emissions each year. Scope 1 and 2 reporting would require registrants to define and disclose how they determine their “organizational” and “operational” boundaries.
- SEC registrants would report on Scope 3 “indirect” emissions in their supply chain if the company has announced a Scope 3 reduction goal – or if investors would deem the registrant’s Scope 3 emissions to be “material.”
- The SEC proposes a “safe harbor” for Scope 3 disclosures related to certain liabilities covered by federal securities law.
- Independent 3rd party assurances would be required for Scope 1 and 2 disclosures, but not for Scope 3.
- Registrants should report on climate targets or goals they set for themselves, their energy efficiency investments, and whether they purchase Renewable Energy Certificates (RECs) or carbon offsets to meet their GHG goals.
- Registrants would also need to report on material “physical risks” to buildings and other assets from climate change – such as those caused by extreme weather, droughts, and coastal flooding.
- Compliance would start with SEC filings in 2024 for the biggest registrants and phase-in for other companies. (Roundtable Fact Sheet)

EPA’s GHG Emissions Calculator for Buildings

In related news, the Environmental Protection Agency (EPA) formally released this week its new ENERGY STAR Building Emissions Calculator.
Key EPA staff recently demonstrated the new calculator for The Roundtable’s Sustainability Policy Advisory Committee (SPAC). [EPA’s step-by-step User’s Guide and other reference materials]
The Building Emissions Calculator expands upon the industry-standard Portfolio Manager tool widely used to benchmark energy usage in buildings. The new offering goes to the next level by allowing owners and managers to estimate historical, current, and future annual GHG emissions resulting from buildings’ energy use.

The Building Emissions Calculator has important potential to assist owners as they strive to comply with state and local building performance standards. EPA’s new calculator can also help real estate companies registered with the SEC to quantify and report on their GHG emissions should the commission’s investor disclosure proposed rule take final shape.

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