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RE: Enhancement and Standardization of Climate-Related Disclosures for Investors (S7-10-22)

RE: Enhancement and Standardization of Climate-Related Disclosures for Investors (S7-10-22) JOURNAL OF SUSTAINABLE REAL ESTATE 2022, VOL. 14, NO. 1, 1–3 ARES https://doi.org/10.1080/19498276.2022.2065797 American Real Estate Society EDITORIAL RE: Enhancement and Standardization of Climate-Related Disclosures for Investors (S7-10-22) To: Ms. Vanessa Countryman, Secretary multinational footprint of many domestic stocks, U.S. Securities and Exchange Commission this issue resonates domestically as well as inter- 100 F St. NE nationally. Importantly, ISO is already overwhelm- Washington, DC 20549 ingly the most used standard for reporting by S&P 500 companies. The relationship between ISO and This comment recommends adoption of the the SEC would be similar to that of the SEC and International Organization for Standardization (ISO) Financial Accounting Standards Board (FASB). With 14000 family of standards as an approved GHG FASB, the SEC acts as an enforcement body and del- reporting methodology under SEC proposed rule egates standards setting to FASB, with approval S7-10-22. The views represented are my own and rights of the standard. Similarly, the SEC could do not necessarily represent those of the Journal of approve ISO standards and set guidelines on Sustainable Real Estate, my university or other enforceable attestation qualifications. affiliations. This comment will briefly outline the global First, allow me to commend the Securities and acceptance of the ISO 14000 family of standards, Exchange Committee (SEC) for proposing this rule; the relevance of multinational acceptance to the capital markets have unequivocally spoken that domestic stocks, the existing predominance of ISO physical and transition risks are material. The tril- as the de facto reporting standard within domestic lions of dollars of capital committed to net zero public firms and identify parallels a SEC/ISO relation- emissions and the additional trillions in ship may have to SEC/FASB. Environmental, Social, and Governance (ESG) related First, the ISO 14000 family of standards, specific- funds globally demonstrate investor demand for ally ISO 14064, is widely accepted across the globe transparent, consistent reporting of climate risk, by many of the United States’ largest economic especially in light of previously opaque claims. The trading partners. The European Commission’s proposed rule discusses what companies need to harmonized standards include numerous ISO meth- odologies, particularly ISO 14064, as an approved disclose and the final rules will assuredly detail how to report those disclosures. This comment makes GHG measurement standard. Australia identifies recommendations on how to report transition risk. ISO 14064 as its approved methodology for GHG The ISO 14000 family of standards, specifically reporting. The Japanese government lists ISO ISO 14064-1, 14064-2 and 14064-3, represents the 14064 as “compliance with international standards.” global standard accepted for greenhouse gas (GHG) The United States’ North American neighbors, reporting across virtually every major economic Canada and Mexico similarly cite ISO 14064 as their 4,5 region. The Climate Neutral Now initiative of the verification standard for GHG reporting. Major United Nations Framework Convention on Climate ESG reporting platforms such as CDP and United Change (UNFCCC) secretariat recognizes the use of Nations Principle for Responsible Investment ISO standards for reporting GHG inventories. This (UNPRI) identify acceptance of ISO standards. The standard is accepted or cited by every major global Global Reporting Initiative (GRI) and SASB do not ESG reporting platform. As a stated goal of the pro- directly list ISO as a standard but there are numer- posed SEC rule is to, “limit the compliance burden ous references to ISO standards throughout their associated with these disclosures (p. 36),” selecting documents. Similarly, the Task Force on Climate- an accepted global standard minimizes the report- related Financial Disclosures, TCFD does not identify ing cost for multinational firms. Given the large any specific standards, but numerous references, 2 S. J. ROBINSON including an example disclosure, do reference ISO. engineers developing and refining ISO standards are The SEC has an opportunity to fully align GHG the experts on GHG measurement and reporting. The reporting with accepted global standards by select- SEC delegating a standards-setting function to the ing ISO as one of, if not the primary, approved appropriate experts represents best and current prac- reporting methodologies. tice. We would no more ask a doctor of chemistry to Global reporting alignment represents a critically opine on a FASB update than we would a doctor of important concern to domestic based public firms. accounting to measure the GHG output of a chem- Nearly half (48%) of the subsidiaries held by S&P 500 ical reaction. companies are defined as foreign subsidiaries One issue the SEC would need to resolve is the (Heckemeyer et al., 2018). Depending on estimates, proper qualifications of attestation professionals. over one third of revenues for S&P 500 firms come Ideally, this would be done in partnership with ISO from outside the United States. In the private capital and potentially through the ISO 14066 standard. sector partially regulated by the Financial Industry Similar to FASB, the SEC could preserve approval Regulatory Authority (FINRA), which is regulated by rights of updated ISO standards, outline guidelines the SEC, private asset managers routinely raise capital towards what an acceptable attestation qualification outside of the United States. Approximately $45 bil- for an ISO provider would be, and other comparable lion of foreign direct investment (FDI) was raised in governance mechanisms. The delegation of standard the Finance and Real Estate sectors alone in 2019 — setting to an internationally recognized and widely firms that raise capital in the European Union already accepted body is consistent with current practices. face reporting requirements there. With $2.3 Trillion In the proposed rule, questions 115 through 132 of FDI from Europe alone, many public and private largely revolve around organizational boundaries, firms currently face global reporting requirements. material change in reporting, data quality and disclos- Clearly, for the many public and private domestic ure. Using the ISO 14000 family would address many firms required to report across multiple economic of these issues. Under ISO guidelines, any shift in regions, a single harmonized reporting standard rep- organizational boundary would need to be clearly resents tremendous value. documented. The data sources and methods would Among the most relevant arguments for the need to be transparently stated. Best available data adoption of ISO standards is that they are already, would be used at all times, with reasonable and by far, the predominant standard used by S&P 500 defensible estimates permitted where data is companies currently reporting GHG. According to unavailable. the Center for Audit Quality, of the firms that In conclusion, this comment recommends that reported external verification of their GHG, 61% of the SEC adopt the ISO 14000 family of standards, them already report under the ISO 14064. In other specifically ISO 14064, as acceptable for GHG report- words, nearly two thirds of GHG reporting firms and ing under proposed rule S7-10-22. It recommends approximately one third of all S&P 500 firms already the SEC outline specific attestation requirements for report and receive external attestation using ISO. ISO 14064 family experts to qualify as attestation Accepting this standard as SEC compliant not only providers. This standard is already globally accepted aligns with global standards but importantly meshes across multiple economic regions, in North America, with existing practice of domestic firms. and through the United Nations. SEC acceptance of As a regulatory body, the SEC may be concerned the standard would greatly mitigate the reporting with its level of control over accepted standards. burden for domestic firms. A significant portion of However, a prospective relationship between ISO and domestically reporting firms engage in multinational the SEC would be analogous to the existing business operations and face multinational reporting and well-functioning relationship between the SEC requirements. This standard is currently the domin- and FASB. The SEC is primarily an enforcement body; ant standard used by domestic firms that are report- as former SEC Chair Mary Jo White stated, “The SEC ing their GHG. A relationship between the SEC and enforces U.S. GAAP as developed by the FASB.” The ISO would be analogous that of the SEC and FASB. SEC delegates the setting of accounting standards to The adoption of the ISO 14000 family of standards accountants as the experts in the field. Similarly, the by the SEC would represent global alignment, ease JOURNAL OF SUSTAINABLE REAL ESTATE 3 of reporting for domestic firms, and a science-based ORCID standard upon which investors can rely. Spenser J. Robinson http://orcid.org/0000-0003-4859-3004 Notes Reference Heckemeyer, J. H., Olligs, P., & Overesch, M. (2018). “Home 1. Commission Implementing Decision (Eu) 2020/183. sweet home” versus international tax planning: Where do 2. National Greenhouse and Energy Reporting (Auditor multinational firms hold their US trademarks? National Tax Registration) Instrument 2019 (legislation.gov.au). Journal, 71(3), 485–520. 3. Japan Greenhouse Gas Emission Reduction/Removal Certification Scheme. From: Dr. Spenser J. Robinson 4. Guidance Third-Party Verification Under The Output- Professor and Director of Real Estate Based Pricing System Regulations. Departments of Finance/Law and Entrepreneurship 5. Criteria for the verification of reports on Emissions of Central Michigan University Compounds and Greenhouse Gases Greenhouse within Mount Pleasant, MI 48859 the framework of the National Registry of Emissions. 6. https://www.cdp.net/en/guidance/verification. 7. https://assets.bbhub.io/company/sites/60/2020/10/2019- TCFD-Status-Report-FINAL-0531191.pdf.  2022 The Author(s). Published with license by Taylor & 8. https://www.morningstar.com/articles/914896/youre-more- Francis Group, LLC. internationally-diversified-than-you-probably-realize This is an Open Access article distributed under the terms 9. https://www.bea.gov/sites/default/files/2021-06/fdi0721.pdf of the Creative Commons Attribution License (http:// 10. S&P 500 and ESG Reporting, The Center for Audit creativecommons.org/licenses/by/4.0/), which permits Quality (thecaq.org). unrestricted use, distribution, and reproduction in any 11. https://www.sec.gov/news/speech/2014-spch052014mjw medium, provided the original work is properly cited. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Sustainable Real Estate Taylor & Francis

RE: Enhancement and Standardization of Climate-Related Disclosures for Investors (S7-10-22)

Journal of Sustainable Real Estate , Volume 14 (1): 3 – Dec 31, 2022

RE: Enhancement and Standardization of Climate-Related Disclosures for Investors (S7-10-22)

Abstract

JOURNAL OF SUSTAINABLE REAL ESTATE 2022, VOL. 14, NO. 1, 1–3 ARES https://doi.org/10.1080/19498276.2022.2065797 American Real Estate Society EDITORIAL RE: Enhancement and Standardization of Climate-Related Disclosures for Investors (S7-10-22) To: Ms. Vanessa Countryman, Secretary multinational footprint of many domestic stocks, U.S. Securities and Exchange Commission this issue resonates domestically as well as inter- 100 F St. NE nationally. Importantly, ISO is already overwhelm-...
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Taylor & Francis
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© 2022 The Author(s). Published with license by Taylor & Francis Group, LLC.
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1949-8284
DOI
10.1080/19498276.2022.2065797
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Abstract

JOURNAL OF SUSTAINABLE REAL ESTATE 2022, VOL. 14, NO. 1, 1–3 ARES https://doi.org/10.1080/19498276.2022.2065797 American Real Estate Society EDITORIAL RE: Enhancement and Standardization of Climate-Related Disclosures for Investors (S7-10-22) To: Ms. Vanessa Countryman, Secretary multinational footprint of many domestic stocks, U.S. Securities and Exchange Commission this issue resonates domestically as well as inter- 100 F St. NE nationally. Importantly, ISO is already overwhelm- Washington, DC 20549 ingly the most used standard for reporting by S&P 500 companies. The relationship between ISO and This comment recommends adoption of the the SEC would be similar to that of the SEC and International Organization for Standardization (ISO) Financial Accounting Standards Board (FASB). With 14000 family of standards as an approved GHG FASB, the SEC acts as an enforcement body and del- reporting methodology under SEC proposed rule egates standards setting to FASB, with approval S7-10-22. The views represented are my own and rights of the standard. Similarly, the SEC could do not necessarily represent those of the Journal of approve ISO standards and set guidelines on Sustainable Real Estate, my university or other enforceable attestation qualifications. affiliations. This comment will briefly outline the global First, allow me to commend the Securities and acceptance of the ISO 14000 family of standards, Exchange Committee (SEC) for proposing this rule; the relevance of multinational acceptance to the capital markets have unequivocally spoken that domestic stocks, the existing predominance of ISO physical and transition risks are material. The tril- as the de facto reporting standard within domestic lions of dollars of capital committed to net zero public firms and identify parallels a SEC/ISO relation- emissions and the additional trillions in ship may have to SEC/FASB. Environmental, Social, and Governance (ESG) related First, the ISO 14000 family of standards, specific- funds globally demonstrate investor demand for ally ISO 14064, is widely accepted across the globe transparent, consistent reporting of climate risk, by many of the United States’ largest economic especially in light of previously opaque claims. The trading partners. The European Commission’s proposed rule discusses what companies need to harmonized standards include numerous ISO meth- odologies, particularly ISO 14064, as an approved disclose and the final rules will assuredly detail how to report those disclosures. This comment makes GHG measurement standard. Australia identifies recommendations on how to report transition risk. ISO 14064 as its approved methodology for GHG The ISO 14000 family of standards, specifically reporting. The Japanese government lists ISO ISO 14064-1, 14064-2 and 14064-3, represents the 14064 as “compliance with international standards.” global standard accepted for greenhouse gas (GHG) The United States’ North American neighbors, reporting across virtually every major economic Canada and Mexico similarly cite ISO 14064 as their 4,5 region. The Climate Neutral Now initiative of the verification standard for GHG reporting. Major United Nations Framework Convention on Climate ESG reporting platforms such as CDP and United Change (UNFCCC) secretariat recognizes the use of Nations Principle for Responsible Investment ISO standards for reporting GHG inventories. This (UNPRI) identify acceptance of ISO standards. The standard is accepted or cited by every major global Global Reporting Initiative (GRI) and SASB do not ESG reporting platform. As a stated goal of the pro- directly list ISO as a standard but there are numer- posed SEC rule is to, “limit the compliance burden ous references to ISO standards throughout their associated with these disclosures (p. 36),” selecting documents. Similarly, the Task Force on Climate- an accepted global standard minimizes the report- related Financial Disclosures, TCFD does not identify ing cost for multinational firms. Given the large any specific standards, but numerous references, 2 S. J. ROBINSON including an example disclosure, do reference ISO. engineers developing and refining ISO standards are The SEC has an opportunity to fully align GHG the experts on GHG measurement and reporting. The reporting with accepted global standards by select- SEC delegating a standards-setting function to the ing ISO as one of, if not the primary, approved appropriate experts represents best and current prac- reporting methodologies. tice. We would no more ask a doctor of chemistry to Global reporting alignment represents a critically opine on a FASB update than we would a doctor of important concern to domestic based public firms. accounting to measure the GHG output of a chem- Nearly half (48%) of the subsidiaries held by S&P 500 ical reaction. companies are defined as foreign subsidiaries One issue the SEC would need to resolve is the (Heckemeyer et al., 2018). Depending on estimates, proper qualifications of attestation professionals. over one third of revenues for S&P 500 firms come Ideally, this would be done in partnership with ISO from outside the United States. In the private capital and potentially through the ISO 14066 standard. sector partially regulated by the Financial Industry Similar to FASB, the SEC could preserve approval Regulatory Authority (FINRA), which is regulated by rights of updated ISO standards, outline guidelines the SEC, private asset managers routinely raise capital towards what an acceptable attestation qualification outside of the United States. Approximately $45 bil- for an ISO provider would be, and other comparable lion of foreign direct investment (FDI) was raised in governance mechanisms. The delegation of standard the Finance and Real Estate sectors alone in 2019 — setting to an internationally recognized and widely firms that raise capital in the European Union already accepted body is consistent with current practices. face reporting requirements there. With $2.3 Trillion In the proposed rule, questions 115 through 132 of FDI from Europe alone, many public and private largely revolve around organizational boundaries, firms currently face global reporting requirements. material change in reporting, data quality and disclos- Clearly, for the many public and private domestic ure. Using the ISO 14000 family would address many firms required to report across multiple economic of these issues. Under ISO guidelines, any shift in regions, a single harmonized reporting standard rep- organizational boundary would need to be clearly resents tremendous value. documented. The data sources and methods would Among the most relevant arguments for the need to be transparently stated. Best available data adoption of ISO standards is that they are already, would be used at all times, with reasonable and by far, the predominant standard used by S&P 500 defensible estimates permitted where data is companies currently reporting GHG. According to unavailable. the Center for Audit Quality, of the firms that In conclusion, this comment recommends that reported external verification of their GHG, 61% of the SEC adopt the ISO 14000 family of standards, them already report under the ISO 14064. In other specifically ISO 14064, as acceptable for GHG report- words, nearly two thirds of GHG reporting firms and ing under proposed rule S7-10-22. It recommends approximately one third of all S&P 500 firms already the SEC outline specific attestation requirements for report and receive external attestation using ISO. ISO 14064 family experts to qualify as attestation Accepting this standard as SEC compliant not only providers. This standard is already globally accepted aligns with global standards but importantly meshes across multiple economic regions, in North America, with existing practice of domestic firms. and through the United Nations. SEC acceptance of As a regulatory body, the SEC may be concerned the standard would greatly mitigate the reporting with its level of control over accepted standards. burden for domestic firms. A significant portion of However, a prospective relationship between ISO and domestically reporting firms engage in multinational the SEC would be analogous to the existing business operations and face multinational reporting and well-functioning relationship between the SEC requirements. This standard is currently the domin- and FASB. The SEC is primarily an enforcement body; ant standard used by domestic firms that are report- as former SEC Chair Mary Jo White stated, “The SEC ing their GHG. A relationship between the SEC and enforces U.S. GAAP as developed by the FASB.” The ISO would be analogous that of the SEC and FASB. SEC delegates the setting of accounting standards to The adoption of the ISO 14000 family of standards accountants as the experts in the field. Similarly, the by the SEC would represent global alignment, ease JOURNAL OF SUSTAINABLE REAL ESTATE 3 of reporting for domestic firms, and a science-based ORCID standard upon which investors can rely. Spenser J. Robinson http://orcid.org/0000-0003-4859-3004 Notes Reference Heckemeyer, J. H., Olligs, P., & Overesch, M. (2018). “Home 1. Commission Implementing Decision (Eu) 2020/183. sweet home” versus international tax planning: Where do 2. National Greenhouse and Energy Reporting (Auditor multinational firms hold their US trademarks? National Tax Registration) Instrument 2019 (legislation.gov.au). Journal, 71(3), 485–520. 3. Japan Greenhouse Gas Emission Reduction/Removal Certification Scheme. From: Dr. Spenser J. Robinson 4. Guidance Third-Party Verification Under The Output- Professor and Director of Real Estate Based Pricing System Regulations. Departments of Finance/Law and Entrepreneurship 5. Criteria for the verification of reports on Emissions of Central Michigan University Compounds and Greenhouse Gases Greenhouse within Mount Pleasant, MI 48859 the framework of the National Registry of Emissions. 6. https://www.cdp.net/en/guidance/verification. 7. https://assets.bbhub.io/company/sites/60/2020/10/2019- TCFD-Status-Report-FINAL-0531191.pdf.  2022 The Author(s). Published with license by Taylor & 8. https://www.morningstar.com/articles/914896/youre-more- Francis Group, LLC. internationally-diversified-than-you-probably-realize This is an Open Access article distributed under the terms 9. https://www.bea.gov/sites/default/files/2021-06/fdi0721.pdf of the Creative Commons Attribution License (http:// 10. S&P 500 and ESG Reporting, The Center for Audit creativecommons.org/licenses/by/4.0/), which permits Quality (thecaq.org). unrestricted use, distribution, and reproduction in any 11. https://www.sec.gov/news/speech/2014-spch052014mjw medium, provided the original work is properly cited.

Journal

Journal of Sustainable Real EstateTaylor & Francis

Published: Dec 31, 2022

References