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U.S. SEC Proposal Would Mandate Corporate Climate Reporting (ESG Reports)

Jun 22, 2022 BuildersGeneralProvidersRaters

 

The Securities and Exchange Commission (SEC) has proposed a corporate rule change that would require publicly traded corporations to include climate-related disclosures in their financial statements and reports.

Such information would address reporting on the company’s climate risks, their operation emissions, and what mitigation strategies they are employing. The disclosures would be included in the company’s audited financial statements.

The proposed rule states, ”If a registrant has set any climate-related targets or goals, then the proposed rules would require the registrant to provide certain information about those targets or goals. Those goals or targets might, for example, relate to the reduction of GHG emissions, or address energy usage, water usage, conservation, or ecosystem restoration. A registrant might also set goals with regard to revenues from low-carbon products in line with anticipated regulatory requirements, market constraints, or other goals established by a climate-related treaty, law, regulation, policy, or organization. The proposed disclosure requirements could help investors better understand the scope of a registrant’s climate-related targets or goals, including those related to GHG emissions, and assist in assessing progress towards achieving those targets or goals.”

The SEC’s action is a demonstration of the increasing role of ESG reporting is playing in financial investments. If this rule is adopted by the SEC, it would provide a dramatic boost to ESG reporting by publicly-traded builders and increased use of HERS® Index ratings as part of the metrics that they report.

RESNET has submitted comments to the SEC on the proposed rulemaking. RESNET’s comments include:

The HERS Index is referenced in the Home Builders Sustainability Accounting Standard produced by the Sustainability Accounting Standards Board (SASB) which is now part of the Value Reporting Foundation. The SASB Standard asks home builders to report the number of homes that have received a HERS Index score and their average score. The Standard also asks for the percentage of installed fixtures that were certified to the WaterSense specifications. More builders are beginning to use this Standard for their sustainability reporting.

The SASB Standard also includes requirements for reporting on climate change exposure risks and strategies for mitigating risks. As the most pertinent reporting framework for the homebuilding industry,

RESNET encourages the Commission to utilize market-based approaches for home builders to report and document their carbon mitigation efforts. We also recommend the final rule recognize the SASB Home Builders Standard.

To download RESNET’s comments to the SEC click on RESNET Comments on SEC Proposed Climate Reporting.

The draft SEC proposed rules are posted at https://www.sec.gov/rules/proposed/2022/33-11042.pdf