SEC finalizes climate disclosure rule

BLOOMINGTON, Ill. — The Securities and Exchange Commission voted March 6 on its final climate disclosure rule and removed the Scope 3 reporting requirement, which would have required public companies, including farmers, to report the greenhouse gas emissions of their supply chain.

American Farm Bureau Federation led the charge for the removal of Scope 3 since the rule was first proposed two years ago. Illinois Farm Bureau supported these efforts with nearly 1,200 members communicating with their representatives about the rule.

“IFB thanks AFBF for leading the charge and working with SEC Chair Gary Gensler and his staff to research the unintended consequences of the Scope 3 rule,” said IFB President Brian Duncan.

“The Scope 3 requirement would have imposed additional burdens on our farmers — especially our small, family-owned farms — which could have potentially led to even more consolidation in our industry.

“Illinois farmers are dedicated to advancing climate-smart agriculture and putting scientific solutions, technology and innovation to work. We have made great strides in this space and recognize the value in collecting scientifically-sound data to share our efforts, such as collaborating with our partners on the recent Illinois Agriculture Retail Survey, which helps us record nutrient loss reduction progress.”

After the rule was proposed in March 2022, more than 100 agriculture interest groups expressed concern that the rule could have required farmers and ranchers to report personal and business-related information to the SEC.

The final rules reflect the SEC’s efforts to respond to investors’ demand for more consistent, comparable, and reliable information about the financial effects of climate-related risks on a registrant’s operations and how it manages those risks while balancing concerns about mitigating the associated costs of the rules, according to an SEC release.

“Our federal securities laws lay out a basic bargain. Investors get to decide which risks they want to take so long as companies raising money from the public make what President Franklin Roosevelt called ‘complete and truthful disclosure,’” Gensler said.

“Over the last 90 years, the SEC has updated, from time to time, the disclosure requirements underlying that basic bargain and, when necessary, provided guidance with respect to those disclosure requirements.

“These final rules build on past requirements by mandating material climate risk disclosures by public companies and in public offerings. The rules will provide investors with consistent, comparable, and decision-useful information, and issuers with clear reporting requirements.

“Further, they will provide specificity on what companies must disclose, which will produce more useful information than what investors see today. They will also require that climate risk disclosures be included in a company’s SEC filings, such as annual reports and registration statements rather than on company websites, which will help make them more reliable.”

OPPOSITION

Friends of Earth — along with 87 other environmental, food and agriculture organizations — advocated for a related proposed climate disclosure rule that would require federal suppliers, including food and agriculture companies, to comprehensively disclose their supply chain emissions.

Friends of Earth said in a press release that “under pressure from Republicans and the Big Ag lobby, SEC Chair Gensler unfortunately – and potentially unlawfully – gutted the original rule” by:

• “Dropping the requirement for U.S.-listed companies to disclose Scope 3 greenhouse gas emissions, which are emissions from their upstream supply chains or from downstream product consumption. For many industries, including the food and agriculture sector, Scope 3 greenhouse gas emissions represent the vast majority of their overall emissions. For example, a recent analysis by the Corporate Climate Responsibility Monitor estimated that Scope 3 emissions from JBS (the world’s largest meat company) constitute 97% of the company’s emissions. This decision by SEC exposes investors to financial risk from incomplete information about a company’s climate risk profile.

• “Weakening requirements for disclosing Scope 1 emissions (those that come directly from a company’s own emissions) and Scope 2 emissions (those that come indirectly from the generation of electricity purchased for a company’s operations) by including a gaping loophole that could allow companies to not report these emissions if they themselves deem them immaterial or unimportant for investors to know.

• “Weakening important amendments to Regulation S-X, which would have required disclosure of critical climate-related impacts on financial statements,” the Friends of Earth statement concluded.