Tag: Securities and Exchange Commission

Roundtable and Business Coalition Urge SEC to Withdraw Proposed Safeguarding Advisory Client Rule

Posted on by Abigail Grenadier

The Roundtable and a diverse group of 25 trade associations this week wrote to Securities and Exchange Commission (SEC) Chair Gary Gensler to oppose a proposed Safeguarding Advisory Client Rule—in its current form—and explain the negative impacts it would have on investors, including their access to various services, assets, and markets with well-established rules and procedures. (Coalition letter, Sept. 12)

Inconsistent and Duplicative

  • The coalition letter notes how the proposal creates requirements that are inconsistent with certain recent or preexisting Commission requirements—and duplicative of, existing safeguards enforced by the Commodity Futures Trading Commission (CFTC), federal banking agencies, and state insurance regulators.
  • The letter emphasizes that substantial, material flaws in core elements of the proposal require changes that would make the proposal no longer meaningful in its current form. The letter states, “Should the Commission decide to make such changes and move forward with rulemaking, we strongly recommend withdrawing and re-proposing the [Safeguarding Advisory Client Rule].”
  • The Commission acknowledged this fact on August 23, 2023, when it re-opened the comment period on the proposal to give the public 60 days to provide additional feedback in light of separate final rules adopted by the SEC regarding the regulation of private fund advisers. (SEC news release, proposed rule, fact sheet, and comments received)
  • The proposal’s range of new custodial requirements would create significant operational and practical challenges to the custody of real estate, even though these assets cannot be misappropriated and are easily tracked by deeds and mortgages recorded by municipalities. These challenges would materially inhibit adviser clients’ access to investment strategies relating to real estate, compounding the pressures that high interest rates and vacancies are placing on commercial and residential markets.

Policymaker Pushback

Sen. Tim Scott (R-SC)
  • During a Senate Banking Committee hearing this week, Ranking Member Tim Scott (R-SC), above, questioned Gensler about the proposal. Sen. Scott noted in his opening statement that the SEC has put forward 47 proposals and adopted 22 of them in the first several months of Gensler’s leadership, not allowing a reasonable amount of time for the public to provide input on proposed rules and for the widespread impact and confuse on created by agency’s proposed rules.
  • During Q&A with Gensler, Sen. Scott stated “…your proposed revisions to the current rules for safeguarding are so overreaching, you’ve placed your fellow regulators at the CFTC, the Fed and Treasury between a rock and a hard place. These proposals and rule makings will have a tremendous effect on our capital market system. Yet under your leadership, the SEC has failed to conduct thorough cost benefit analysis, much less look at the overall impacts of these proposal and has limited the time the public can have—the time to analyze and then comment on these rules and the proposals.” (CQ transcripts)

The Roundtable’s Real Estate Capital Policy Advisory Committee (RECPAC) established a Custody Rule Working Group, which is working on comments about the SEC proposal that are due October 30. The working group also plans to meet with the SEC’s Division of Investment Management.

CRE Coalition Asks EPA to Help Standardize Conflicting State, Local Building Emissions Laws

Posted on by Abigail Grenadier

The Real Estate Roundtable and industry partners encouraged the U.S. Environmental Protection Agency (EPA) on Sept. 14 to enhance its set of effective, standardized, and voluntary federal tools that can assist real estate companies meet climate targets imposed by city and state laws. (Real estate coalition letter, Sept. 14)

EPA Standards to Quantify Emissions

  • The coalition endorsed EPA’s planned improvements to its free, online Portfolio Manager benchmarking tool, announced in an ENERGY STAR July 2023 policy brief. Nearly 25% of U.S. CRE space measures energy and water use, waste disposal, and GHG emissions using Portfolio Manager.  
  • Without EPA’s voluntary resources to support uniform emissions measurement, compliance with local mandates is “exceedingly difficult, impracticable, and in some cases, impossible,” the letter states.
  • “We value greatly our longstanding collaboration with the US-EPA’s ENERGY STAR program.  It is the gold standard of resources which help our industry report on energy efficiency and the financial impacts from the increase of renewable energy supplies,” said Roundtable Sustainability Policy Advisory Committee Chair, Tony Malkin (Chairman, President, and CEO, Empire State Realty Trust), below.
SPAC Chair Tony Malkin
  • Malkin added, “Non-binding federal guidelines from the EPA’s strong and best-in-class analytical frameworks are the North Star through which local governments can inform their law-making, and this helps to bring some sense and order to the otherwise conflicting patchwork of climate laws and frameworks developed by states, cities, and NGOs. The future is hard facts and data, and our industry is fortunate to have a constructive and productive relationship with the EPA that focuses on points on the board, the how to address the what.”  
  • The American Hotel & Lodging Association; Building Owners and Managers Association (BOMA) International; CRE Finance Council; ICSC; Mortgage Bankers Association; NAIOP, Commercial Real Estate Development Association; and Nareit® joined The Roundtable on the coalition letter.

Anticipated SEC Climate RulesSecurities and Exchange Commission (SEC) seal

  • The Roundtable’s call for uniform methods to calculate and report emissions anticipates overdue rules this fall from the U.S. Securities and Exchange Commission (SEC). The SEC’s rules are expected to compel registered companies to disclose in investor filings material financial impacts related to climate change. (See Roundtable Weekly, June 10, 2022 and RER comments).
  • Gensler is also scheduled to testify before the House Financial Services Committee on Sept. 19.

The Biden administration’s emphasis on climate policy will continue this fall, when it is expected to propose a uniform federal definition on the long-term concept of “zero emissions buildings.” The Roundtable’s SPAC will convene a working group to analyze the definition upon its release for public comments.

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Roundtable and Nareit Raise Concerns to SEC About Proposed Cybersecurity Rules; SEC Climate Proposal Stokes GOP Criticism

Posted on by Trey Jackson

Cybersecurity computer operator at console with world map

The Real Estate Roundtable and Nareit raised concerns to the Securities and Exchange Commission (SEC) about their proposed rules related to cybersecurity risk management, strategy, governance, and incident disclosure. (Comment Letter, May 9)

Industry Concerns

  • The letter states that The Roundtable and Nareit generally support the SEC’s efforts to ensure that investors receive accurate and comparable material information regarding company cyber risk management and incidents. (SEC  News Release |  Proposed Rule |  Fact Sheet)
  • However, the two industry groups expressed a number of concerns arising from the detailed, granular reporting that would be required by the SEC proposal and its rigid incident reporting deadlines, which may unintentionally exacerbate cybersecurity risks for issuers and impose unjustified burdens. Those concerns include:
  • It is vital to harmonize SEC reporting requirements with other federal and state cyber incident reporting requirements.
  • The Commission’s proposed 72-hour reporting window should incorporate flexibility for a reporting delay to accommodate other law enforcement and other contingencies.
  • Registrants should not be required to report detailed descriptions of their internal cybersecurity gameplans, which could compromise them in any number of ways.
  • The prescriptive requirements for disclosing risk management, strategy, and governance regarding cybersecurity risk are burdensome and unjustified.
  • The letter also raises concerns about the highly prescriptive nature of the requirements set forth in the Proposal and the “one size fits all” presumption that the prescriptive requirements will be appropriate for all industry sectors.

SEC Climate Disclosure Proposal

logo - U.S. Securities and Exchange Commission

  • A separate SEC proposal on climate disclosure rules has drawn the ire of House Republicans, who have criticized the proposal and called for a hearing with the full commission. (E&E News, May 10)
  • In a May 4 letter to SEC Chair Gary Gensler, a group of House Republicans led by Oversight and Reform ranking member James Comer (R-KY) stated, “The Climate Disclosure Rule would represent the largest expansion of SEC authority without a clear legislative mandate from Congress.”
  • A regulatory push on multiple fronts by the Securities and Exchange Commission (SEC) prompted The Real Estate Roundtable and 24 other national business organizations to submit comments to Gensler about the need for more time to assemble meaningful stakeholder analysis as part of the rulemaking process. (Coalition letter, April 5 and Roundtable Weekly, April 8)

The proposed SEC climate disclosure 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)

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Roundtable Warns SEC Proposed Rules Affecting Private Fund Advisers Pose Unnecessary Burden on Capital Formation and Investment

Posted on by Trey Jackson

SEC logo on wall with American flag

The Roundtable submitted comments this week to address the potential negative consequences of recently proposed Securities and Exchange Commission (SEC) regulations affecting real estate private equity investment fund advisers. (SEC comment letter, April 25) 

Negative Consequences 

  • The Roundtable’s April 25 comments detail how the proposal could have a negative impact on real estate private fund disclosures, reporting, fees and expenses, and operations—with significant results for the $18-trillion private fund adviser marketplace.
  • The letter also explains how the Commission’s extensive reporting requirements proposed under the new rules would increase compliance costs, decrease returns for all private fund investors and drive smaller fund sponsors away from the market. (SEC Feb. 9 News Release | Proposed Rule | Fact Sheet)
  • The Roundtable letter raises concerns that the SEC proposal, if finalized, could hinder real estate capital formation; harm development and improvement of real properties; and curtail essential economic activity that encourages job creation. 

Interrelated, Multiple Rulemakings 

SEC building

  • The SEC, above, has proposed a number of other complex rules with potentially wide-ranging, significant consequences—all at the same time—and given the public abnormally short, 30-day comment windows to participate in these interrelated rulemakings. (Roundtable Weekly, April 8)
  • The Commission’s private fund adviser proposal is one of many of these rulemakings. This rulemaking alone seeks open-ended and extensive information from stakeholders and the public, including more than 800 individual questions and more than 60 specific questions on the cost-benefit analysis portion.
  • The Real Estate Roundtable and 24 other national business organizations recently submitted comments to SEC Chairman Gary Gensler regarding the need for more time to assemble meaningful stakeholder analysis as part of the rulemaking process. (Coalition letter, April 5) 

The Roundtable’s Real Estate Capital Policy Advisory Committee (RECPAC) will continue to engage the SEC on its various rulemakings and address individual proposals in more detail at its next meeting on June 16 during The Roundtable’s all-member June 16-17 Annual Meeting.  

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Roundtable and Broad Business Coalition Request SEC to Provide Appropriate Comment Time Periods for Multiple Rulemakings

Posted on by Trey Jackson

SEC Chairman Gary Gensler

A regulatory push on multiple fronts by the Securities and Exchange Commission (SEC) prompted The Real Estate Roundtable and 24 other national business organizations this week to submit comments to SEC Chairman Gary Gensler, above, about the need for more time to assemble meaningful stakeholder analysis as part of the rulemaking process. (Coalition letter, April 5)

SEC Proposals & CRE 

  • A long list of recent, overlapping SEC proposals affecting business are cited in the coalition letter, including four rulemakings that could significantly impact the real estate industry: 

1.)  Jan. 26 – the SEC issued a proposal that would impose new reporting requirements on real estate investment and private equity advisers, including a mandate to file reports (Form PF) within one business day of certain events. (SEC News Release | Fact Sheet | Proposed Rule)

  • The Roundtable’s March 21 response stated the SEC proposal “presents significant compliance and operational challenges for private real estate fund sponsors, with no added benefit to investors and no relation to the intent of Form PF in monitoring systemic risk.” (Roundtable Weekly, March 25)

2.)   Feb. 9 – the SEC also proposed new rules and amendments affecting private fund advisers. (SEC News Release | Proposed Rule | Fact Sheet)

  • The Roundtable plans to submit comments by April 25 to the SEC, which stated it is aiming to increase transparency and efficiency in the $18-trillion private fund adviser marketplace. (Roundtable Weekly, Feb. 11)

3.)   March 9 – the SEC issued another proposal that would require publicly traded companies to disclose a cybersecurity incident within four days of determining a breach is “material,” or important to the average investor. (SEC News Release | Proposed Rule | Fact Sheet)

  • The Roundtable is working on comments due by May 9 regarding the reporting requirement proposal addressing material cybersecurity incidents. (Roundtable Weekly, March 18)

4.)   March 21 – the SEC issued a proposed rule regarding the reporting and disclosure of material corporate financial risks related to climate change. (SEC News Release | Proposed Rule | Fact Sheet, March 22 and Roundtable Weekly with Roundtable Climate Proposal Fact Sheet, March 25)  

  • Stakeholder input on the proposed climate disclosure rule is due to the SEC around May 20. The Roundtable is working on a comprehensive response that will include information from a Roundtable member survey due this Monday, April 11. (see related Roundtable Weekly story on the survey, above)

 Coalition Request 

SEC logo - image

  • This week’s coalition letter to the SEC noted, “The hundreds-upon-hundreds of questions, and numerous catch-all requests for comment, posed in these rulemakings reflect the Commission’s recognition that it needs input from the public to properly craft the proposed rules, yet the Commission is refusing to allow the public the time it needs to answer the Commission’s questions satisfactorily.”
  • The business coalition requested that the SEC should not reflexively assign a 30-day or 60-day comment period to multiple rule proposals. The coalition commented, “Exceedingly short comment periods associated with numerous concurrent potentially inter-connected rule proposals … could result in rules that hurt investors, damage the financial system, and implicate the Commission’s obligations.” (Coalition letter, April 5)

The SEC’s various rulemaking proposals affecting CRE will be discussed during The Roundtable’s April 25-26 Spring Meeting (Roundtable-level members only) in Washington, DC. 

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Roundtable Survey Seeks Members’ Input on SEC Climate Risk Disclosure Proposal

Posted on by Trey Jackson

SEC building exterior

Real Estate Roundtable members received a survey earlier today that will help formulate comments in response to a proposed rule issued on March 21 by the U.S. Securities and Exchange Commission (SEC) regarding corporate disclosures of climate-related financial risks. (Roundtable Weekly, March 25) 

Roundtable Member Participation 

  • The Roundtable requests that members respond to the SEC climate issues survey by COB April 11.

  • Before submitting responses to the survey, members are encouraged to review The Roundtable’s fact sheet summarizing the SEC’s proposed rule.
  • The survey sent today aims to obtain a high-level understanding of the existing practices and standards used by Roundtable members in assessing and quantifying the following:
    • greenhouse gas (GHG) emissions across their portfolios,
    • their buildings’ electricity use,
    • impacts to their real estate assets from floods and rising sea levels,
    • how they interact with their tenants on these matters, and
    • similar questions that will likely require registered companies to report on their climate-related financial risks.
  • If any Roundtable member has questions about the survey, please contact Roundtable Senior Vice President and Counsel, Duane Desiderio.

SEC Climate Risk Proposal

Flooding of mixed used building

  • The proposed rule has no immediate effect. If the proposal is finalized, all companies registered with the SEC would be required to report, measure, and quantify “material” risks related to climate change in their annual Form 10-Ks and certain other filings. (SEC News Release | Proposed Rule | Fact Sheet, March 22)
  • Compliance would phase-in over the next several years. For example, registrants with a global market value of $700 million or more would need to comply first for filings in FY 2024 (covering FY 2023 emissions).
  • “Limited assurance” from independent third party verifiers, regarding so-called Scope 1 and Scope 2 emissions, would be required for the first two compliance years. Thereafter, “limited assurance” would ramp-up to “reasonable assurance” at a level provided in a financial statement audit filed with a 10-K.
  • Indirect “supply chain” emissions – known as “Scope 3” – are considered the most difficult emissions to measure and quantify. Under the SEC’s proposal, reasonable efforts to report on Scope 3 emissions would receive a “safe harbor” from certain liability under federal securities laws. Also, third-party verification of Scope 3 reporting would be optional. 

The SEC proposal, formally 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)  

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Roundtable Opposes SEC Proposals Impacting Real Estate and Private Fund Advisors

Posted on by Trey Jackson

SEC logo on wall with American flag

The Real Estate Roundtable on March 21 submitted comments to the Securities and Exchange Commission (SEC) opposing a proposal that would impose new reporting requirements on real estate investment and private equity advisers, including a mandate to file reports within one business day of certain events. The proposal “presents significant compliance and operational challenges for private real estate fund sponsors, with no added benefit to investors and no relation to the intent of Form PF in monitoring systemic risk,” according to The Roundtable’s letter.

Cost and Timing Burdens 

  • The SEC’s proposal would impose new requirements on Form PF, the confidential reporting form for certain SEC-registered private fund advisers. The proposal reflects the SEC’s experiences with recent market turmoil, including the COVID-19 crisis and the January 2021 market volatility impacting certain stocks. (SEC, Jan. 26 News Release | Fact Sheet | Proposed Rule)
     
  • New disclosure obligations in the Commission’s proposal include:
     
    • Additional reporting requirements for large hedge fund advisers and advisers to private equity funds, obligating such advisers to report a number of specified events to the SEC within one business day of their occurrence;
    • A lowered threshold for large private equity adviser reporting;
    • Certain revised reporting questions for private equity funds; and
    • Enhanced reporting requirements for large liquidity fund adviser. 

The Roundtable’s Response 

SEC building exterior

  • The Roundtable’s March 21 comment letter details why the proposed reporting requirements for Form PF should not be adopted. While the letter acknowledges the SEC’s intention to enhance the monitoring of systemic risk, it also outlines how the proposed reporting requirements present significant compliance and operational challenges for private real estate fund sponsors. Some of the key points made against the proposed new requirements include:
    • A one-day reporting requirement imposed on private equity advisers for any reason is unprecedented, and a requirement to report the specific transactions and events deemed by the SEC to be systemically important is wholly unsupported.
    • The proposed amendments to Section 4 of Form PF impose onerous new reporting requirements that force “large private fund advisers” to report sensitive information unrelated to monitoring for systemic risk.
    • The significant added cost and timing burdens of the proposed amendments are unreasonable and do not provide investors with commensurate benefits or protections or enhance systemic risk monitoring.
    • The reduced threshold for reporting private equity advisers is arbitrary. The SEC’s rationale for choosing 75% of committed capital as a meaningful threshold for purposes of FSOC’s systemic risk-monitoring function is unclear. 

A March 16 analysis of the proposed SEC amendments on Form PF is available from Dechert LLP. The Roundtable’s Real Estate Capital Policy Advisory Committee (RECPAC) will continue to respond to the SEC’s various proposed regulatory initiatives with its industry and coalition partners. 

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SEC Proposes 4-day Cybersecurity Reporting Requirements for Public Companies; Roundtable’s HSTF Plans Security Threat Briefings

Posted on by Trey Jackson

Gary Gensler of the SEC

The Securities and Exchange Commission (SEC) on March 9 issued a proposed rule that would require publicly traded companies to disclose a cybersecurity incident within four days of determining a breach is “material,” or important to the average investor. (BGov, March 11 and SEC News Release | Proposed Rule | Fact Sheet)

Proposed SEC Requirements

  • SEC Chair Gary Gensler, above, said, “Today, cybersecurity is an emerging risk with which public issuers increasingly must contend. I am pleased to support this proposal because, if adopted, it would strengthen investors’ ability to evaluate public companies’ cybersecurity practices and incident reporting.” (Bloomberg, March 9)
  • An SEC spokesperson noted that the crisis in Ukraine gave these proposals “special relevance.” (CNBC, March 9 and see story below on The Roundtable’s upcoming March 25 discussion on the Ukraine conflict)
  • The proposed SEC amendments would include requirements around reporting material cybersecurity incidents – and providing periodic updates for previously reported cybersecurity incidents. (Wall Street Journal, March 9)
  • The proposal also would require periodic reporting related to:
    • a registrant’s policies and procedures to identify and manage cybersecurity risks;
    • the registrant’s board of directors’ oversight of cybersecurity risk; and
    • management’s role and expertise in assessing and managing cybersecurity risk and implementing cybersecurity policies and procedures.
  • The Real Estate Roundtable is planning to provide comments on the SEC proposal in advance of the May 9, 2022 submission deadline and looks forward to Roundtable members’ input. The proposed four-day reporting timeframe for companies to provide cyber disclosures may not provide enough time for companies to discover the full extent of an incident. (BGov, March 11)

Cybersecurity Threats

Cybersecurity computer operator at console with world map

  • An Audit Analytics report  released last year showed the number of cybersecurity intrusions reported by public companies increased from 28 breaches in 2011 to 117 in 2020.
  • The average cost of a corporate data breach was $4.24 million in 2021, according to an annual IBM Security report.
  • Separately, the $1.5 trillion omnibus bill spending bill enacted on March 11 included the Cyber Incident Reporting for Critical Infrastructure Act. The legislation establishes a narrower 72-hour window for critical infrastructure owners and operators to disclose a cyberattack to the Cybersecurity and Infrastructure Security Agency (CISA). Certain businesses are also required to report any ransom payments to the federal government within 24 hours, among other changes. (Brownstein Hyatt Farber Schreck, March 14)

REISAC logo

  • The Real Estate Roundtable’s Homeland Security Task Force (HSTF) is coordinating briefings on the following security threats through the Real Estate Information Sharing and Analysis Center (RE-ISAC):
    • April: DHS Sector Outreach and Programs (Active Shooter, and other soft target resources for the Commercial Facilities Sector)
    • May: DHS Fusion Center overview
    • June: US Secret Service cybercrime
    • August: The Protective Security Advisor Program
    • September: FBI cybersecurity/cybercrimeNovember: The InfraGard program 

Roundtable members interested in participating can contact Andy Jabbour of the RE-ISAC. 

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SEC Proposes Increased Oversight for Private Investment Funds; Delay Reported for Proposed Climate Risk Rule

Posted on by Trey Jackson

SEC logo - image

The U.S. Securities and Exchange Commission (SEC) on Feb. 9 proposed expansive, new disclosure requirements for private investment funds, while an anticipated proposed rule that could require issuers to report on GHG emissions has been delayed. (Wall Street Journal Feb. 9 and Bloomberg, Feb. 8) 

Proposed Rules & Private Funds

  • This week’s proposed rule, if approved, would require private-equity and hedge-fund managers to provide statements on fund performance, compensation, fees and expenses. The proposal passed the Commission on a 3-1 party-line vote, with one dissenting Republican. (PoliticoPro, Feb. 9)
     
  • Managed Funds Association President and CEO Bryan Corbett responded, “The SEC’s proposed additional regulations on private funds will harm the most sophisticated investors, including pensions, endowments and foundations, who rely on these funds to serve their beneficiaries. The agency’s treatment of private funds as if they were serving retail investors is misguided.” (Pensions and Investments, Feb. 8)

Climate Risk Disclosures & CRE 

SEC Chair Gary Gensler

  • Reps. Andy Barr (R-KY), French Hill (R-AR) and Bill Huizenga (R-MI) on Oct 6, 2021 wrote to SEC Chair Gary Gensler, above, claiming the SEC lacks jurisdiction to create and implement policies affecting private, non-market companies. “Lest there be any doubt, we wish to emphasize that the SEC has no authority to impose public disclosure obligations—regarding climate or otherwise— on private businesses that have not accessed the public capital markets,” the Members wrote. 
  • Bloomberg reported this week that the SEC has delayed the release of a separate proposed rule that could require REITs and other issuers to disclose GHG emissions and climate-related financial risks in their Commission filings.  (Bloomberg, Feb. 8) 
  • The climate risk proposal may extend into March or later, according to Bloomberg. Gensler previously announced it would be released last year. (Roundtable Weekly, June 11, 2021 and Reuters, May 6, 2021). 
  • The SEC’s climate proposal is widely expected to evolve into the first-ever federal rule that will require companies to measure and report on GHG emissions they directly cause (“Scope 1”), and emissions attributable to their electricity purchases (“Scope 2”). 
     
  • A brewing controversy is whether the SEC might also direct issuers to estimate and report on indirect “Scope 3” emissions up and down corporate supply chains. (Reuters, Jan. 19)
     
  • If the Commission potentially mandates “Scope 3” disclosures, the requirement could possibly impose new obligations on some commercial property owners to report on the emissions of their tenants – and some banks to report on the emissions of their borrowers.
     
  • Pre-rulemaking comments filed by The Roundtable last year, developed in close coordination with Nareit, point out that building owners should not be required to disclose tenant emissions simply because property owners do not even have access to leased-space energy data in many instances.
     
  • Any proposed rule from the SEC will trigger a public feedback process, followed by internal agency review, before it would take effect. 

The SEC’s climate rule is considered a major environmental initiative of the Biden Administration, particularly as GHG reduction provisions in the Build Back Better Act face a steep climb to pass the Senate. (Bloomberg, Feb. 8) 

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SEC Issues Guidance on Climate Risk Disclosures

Posted on by Trey Jackson

SEC logo - image

The Securities and Exchange Commission (SEC) issued non-binding guidance on Sept. 22  on how companies within its jurisdiction should disclose risks related to climate change under current standards. The guidance comes as the SEC is preparing proposed regulations – expected by early next year – on anticipated climate reporting mandates that will likely impact all issuers of securities, including real estate companies. 

Why It Matters 

  • The Sept. 22 guidance amplifies the Commission’s 2010 Climate Change Guidance. It explains that companies should include in their formal SEC filings the same kinds of climate and ESG-related disclosures that they provide in their annual corporate social responsibility reports.
     
  • The latest guidance advises companies to disclose information (deemed to be “material”) on topics such as:

    • Whether climate-related local, state, or federal laws or regulations – or international accords – impact the company’s finances or operations;
    • Past or future capital expenditures for “climate-related projects”;
    • Increased demands for renewable energy generation and transmission;
    • Reputational risks from corporate operations that produce greenhouse gas emissions;
    • Whether floods, fires, hurricanes, and other “extreme weather events” affect thye company; and
    • Purchases or sales of carbon offsets or credits. 

Guidance Portends New Rule

SEC Chairman Gary Gensler

  • The Sept. 22 guidance portends a proposed rule from the Commission that will likely lead to mandated climate change disclosures.
  • SEC Chair Gary Gensler, above, remarked on Sept. 22 that its proposed rule on climate disclosures will be released by early 2022. A proposed rule would then kick-off a process for public comments from industry stakeholders.
     
  • Earlier this year, the Commission inquired about what kinds of updated climate and ESG-related information may be “material” to investors – and whether such information should be included in annual reports, proxy statements, and other SEC filings. (SEC’s March 15, 2021 “Public Statement” welcoming input on climate change disclosures.) 
  • The Real Estate Roundtable responded in June to the SEC’s “pre-rulemaking” statement.  The Roundtable developed its comments  in close coordination with Nareit, and recommends a “principles-based” approach to corporate climate risk disclosures as opposed to a prescriptive “one size fits all” reporting mandate. (Roundtable Weekly, June 11, 2021) 

A final rule from the SEC on climate risk reporting could be issued by the end of 2022, after conclusion of the public comment process on any forthcoming proposal. 

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