Recent SEC rules mandate that all the largest listed US equities report their Scope 1 and Scope 2 material greenhouse gas emissions and other climate-related financial information. This ruling addresses the lag in climate emissions disclosure by US companies compared to other developed economies. The ruling also applies to large non-US companies that are listed on US stock exchanges. An MSCI report reveals that only 45 percent of US-listed companies currently disclose their Scope 1 and 2 emissions, in contrast to 73 percent of listed firms in other developed markets. The new rules will align climate disclosure regulations among advanced countries, particularly crucial as it will standardize carbon disclosure among all companies, bringing parity and aiding ESG rating companies for better investor judgment. The ruling does require disclosure of Scope 3 emissions if they are material and included in the company’s emissions targets. However, the recent ruling also relates to climate targets, disclosure of materiality, scenario planning, and transition plans for understanding better contingency and just transition scenarios. In this regard, US companies lag in measuring some Scope 3 emissions compared to other developed markets – a 25 percentage point gap based on MSCI analysis.1
With ESG investing becoming a major issue globally, this ruling by the SEC will promote transparency and provide an impetus for increased investments in clean energy. Peter Fusaro, a major green energy subject matter expert, in his podcast with Nishant Malhotra, stressed the $1 trillion green energy market size.
Check out the podcast with Peter Fusaro here.
Renewable Energy components, as per the REN21 report, include:
- Solar (photovoltaic and concentrated solar power)
- Wind (onshore and offshore)
- Geothermal
- Bioenergy (solid biomass, liquid biofuels, and biogas)
- Hydropower
- Marine energy (tidal, wave, and ocean thermal energy)
The US, European Union, China, Brazil, India, and Japan are some of the most significant and largest regions for renewable power. All these countries/regions mentioned, except Japan, are also the largest emitters of greenhouse gas. According to the REN21 report, renewable energy grew by 4.7 percent between 2010 and 2020, a numerical figure that needs to increase at a much faster rate if the Paris Agreement targets need to be met.
Refer to the report
- MSCI: What the SEC’s New Climate Disclosure Rules Could Mean for Companies and Investors