In early March, the US Securities and Exchange Commission announced its decision not to require the companies it regulates to disclose their Scope 3 greenhouse-gas (GHG) emissions.
The regulator’s previously published draft disclosure regulations had included mandatory reporting of supply-chain and product-consumption emissions. So, the weakening of the final rules published on March 6 was met with a chorus of disapproval from disappointed environmental activists.
US senator Elizabeth Warren, echoing the thrust of much of this criticism, lambasted the SEC’s choice to “significantly weaken the rule in response to an onslaught of corporate lobbying.”
However, some bankers who are active in sustainability finance were more sanguine. They point out that the market is already moving on to focus on Scope 3 requirements for sustainability performance targets (SPTs).
On average, Scope 3 (which includes GHG emissions that come from a company’s supply chain, as well as post-sale emissions from the use of company’s product) account for more than 70% of a company’s total emissions. They are the heart of the matter.
As Scope 3 emissions are outside the direct control of an issuer of a sustainable finance transaction, they are much harder to measure and manage.
