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The Green Sheet: The Fed and SEC plant seeds for better corporate climate reporting

Monday, October 11, 2021 by Robinhood Snacks | Disclosures
This storm looks expensive [Rapideye/E+ via Getty Images]

This storm looks expensive Rapideye/E+ via Getty Images

Climate-change stress… is getting financial. Risks related to climate change could affect global markets in a big way, and US officials are taking note. Last week, the Fed moved closer to launching climate-risk safety checkups. And the SEC is trying to amp up rules for corporate climate reporting. The disclosures could change company valuations, and how investors view entire industries. The details:

  • Climate checkup: The Fed wants to require Big Banks to tally climate risks — aka how much $$ is threatened by intensifying wildfires and floods.
  • Climate filings: The SEC wants public companies to share how climate change could affect their business (think: fossil-fueled lawsuits), demand for carbon-heavy products, and what they’re spending to stay compliant.
  • Targets: The SEC might also make companies share five-year plans for cutting emissions, plus net-zero goals.

Late to the climate rally… The US is playing catch-up with countries like England and France, which have already set corporate climate-reporting standards. Meanwhile, companies have been making their own rules:

  • Neutralize: Tech giants like Amazon and Microsoft made plans to go carbon-neutral. Google says it’s been carbon-neutral since 2007.
  • Transition: Oil companies Exxon, Shell, and BP have made multibillion-dollar plans to shift to renewable energy.
  • Clean-vest: Investment firms like BlackRock have prioritized renewables to de-risk funds.

Green filter... About 90% of S&P 500 companies share voluntary climate reports. But they’re usually not regulated, and sometimes “greenwashed” to inflate progress:

  • Facts: Most Fortune 500 companies have emissions targets, but only 20% are based on science.
  • Dally: Amazon committed to carbon neutrality by 2040 in 2019, but its emissions have actually grown 15%+ annually since.
  • Lip service: Companies like Costco have said they want to reduce their footprints, but haven’t set formal targets yet.
THE TAKEAWAY

Goodbye, greenwashing… Because climate accounting is about to be clearer. Standardized climate reporting through the Fed and SEC will likely make it harder for companies to fudge their environmental impact. US officials say better reporting will drive more capital to greener industries, and help countries reach net-zero emissions. Big money is at stake too: Extreme weather has cost the US $1.9T since 1980, and $95B last year alone.

Correction: In the original version of this story published Monday, Oct. 11, we misstated that Netflix had not yet set targets to reduce its carbon footprint. The company has set targets, which you can read about here and here.