On March 21, the U.S. Securities and Exchange Commission (SEC) proposed a rule to enhance and standardize climate‑related disclosures. If adopted, the rule would require public companies operating in the United States to make public certain climate change-related data.

We commend the SEC for proposing such a robust and comprehensive set of required disclosures. It is increasingly clear that climate-related risks are already upon us and are having major financial and economic outcomes. These risks range from the company-specific to the systemic, which is why many of the world’s largest central banks are also engaged in the Network for Greening the Financial System (NGFS), which focuses on creating an orderly transition to a low carbon future. The possibility that climate change could reduce global GDP by nearly 20% by midcentury1 if the problem is not effectively addressed is only one illustration of the magnitude of the systemic risk posed by climate change.

Particularly, we commend the SEC for requiring comprehensive emissions disclosures and for establishing phase-in periods for these disclosures, with a longer phase-in period for more difficult reporting.

Reporting on climate risks will take some effort and expense, particularly in the beginning, during its phase-in. But not having this information is also costly, and probably far more costly than integrating climate risks into investment decisions. It would mean a future of increasingly frequent and unpleasant surprises for investors should we lack the tools to anticipate and price climate risks, which are already affecting the performance and competitiveness of companies across the globe. The prospects for future disruption of economic growth are significant; as the Federal Reserve recently noted, “climate change may increase the risk of very poor growth outcomes — which may lead to a variety of adverse impacts.”2 Facing a future without information and tools to assess this kind of risk is unacceptable.

In our comment letter to the SEC, we offer suggestions that we believe would strengthen the proposed rule. Here is a summary.

Reporting on Decarbonization Targets – We suggest the SEC amend the proposed rule to specify that companies using carbon offsets or Renewable Energy Certificates (RECs) for greenhouse gas disclose sufficient information about the offsets — their permanence, additional and duplication3 — to determine whether the offsets actually contribute to lower atmospheric carbon concentrations. Doing so would help prevent the rule from discouraging companies to adopt emissions reduction targets.

Clarifying Physical Risk – We suggest the rule include the expansion of human and agricultural pests and diseases from tropical regions to temperate zones as one of the chronic physical risks.

Defining Terms – To provide clarity and prevent confusion, we suggest the agency provide definitions on the terms “short,” “medium,” and “long term” in the context of the rulemaking, as these timeframes are particularly pertinent to assessing vulnerability to physical risks.

Safe Harbors – We believe the SEC should consider establishing safe harbors for reporting on vulnerability to physical risks, given that these rely on a suite of climate models that are constantly being updated and refined, and the predictions they yield will vary. The commission should also establish safe harbors for reporting on how companies are planning to reach (GHG) reduction targets. While near-term emissions reduction activities may be reasonably well known, many targets extend to midcentury, and a lot can change in 30 years.

The cost of disclosure, the cost of being in the dark

The SEC did a good job estimating the costs of compliance with this rule. Companies may face costs to create systems for gathering and verifying data, but many of those costs will be front-loaded, decreasing over time as they gain familiarity with the process. While requiring this reporting may involve significant costs in the short term, it is important to acknowledge that there are costs to not having this information. As the already substantial impacts and costs of climate change continue to grow, not understanding the landscape of climate risk will be increasingly expensive for both companies and their investors as well as other stakeholders, like employees.

The SEC has laid out a persuasive and comprehensive case for the financial materiality of climate change as a range of investment risks—including physical risks. Currently, gathering information from companies about their vulnerability to physical climate risks is difficult. Many report very little on the locations of their operations, often mentioning only cities, countries, or regions. But even within a metropolitan area, vulnerability to physical risk can vary widely. Gathering data on the locations of facilities alone can take hundreds of person-hours just to assess a single portfolio, often because investors are seeking information that does not exist. That information is relatively straightforward for companies to disclose but laborious and time-consuming for investors to gather. It is time for this to change.

The SEC’s proposed rule would bring sunlight to the information investors need to understand a wide range of climate-related risks companies face, so they can make more informed decisions about which risks to take and how to value them.

The proposed rule is well-conceived and well-supported — and not a moment too soon.

Read our full comment letter


1 Natalie Marchant, “This Is How Climate Change Could Impact the Global Economy,” World Economic Forum, June 28, 2021.

2 Michael T. Kiley, “Growth at Risk From Climate Change,” Finance and Economics Discussion Series, Divisions of Research & Statistics and Monetary Affairs, Federal Reserve Board, Washington, DC, 2021-054. Growth at Risk From Climate Change (federalreserve.gov)

3 Permanence: Some offsets may cease to reduce carbon concentrations under certain circumstances; for example, if afforestation is used as an offset, it should only be claimed once, and if the forest is burned or is degraded by insect infestations, the offset should be reduced accordingly. Additional: Offsets should only be claimed if the project undertaken would not have happened without the registrant’s funding. Moreover, investing in, for example, an existing forest does not provide additional carbon capture and storage, and should not be counted as an offset after the initial investment. Duplication: If more than one entity funds an offset project, each entity should only claim its share of the emissions offset, not the entire amount.

Julie Gorte, Ph.D.

Senior Vice President for Sustainable Investing

Julie Gorte is Senior Vice President for Sustainable Investing at Impax Asset Management LLC, the North American division of Impax Asset Management Group and investment adviser to Pax World Funds.

She oversees environmental, social and governance-related research on prospective and current investments as well as the firm’s shareholder engagement and public policy advocacy. Julie is also a member of the Impax Gender Analytics team.

Prior to joining the firm, Julie served as Vice President and Chief Social Investment Strategist at Calvert. Her experience before she joined the investment world in 1999 includes a various number of roles. Julie spent nearly 14 years as Senior Associate and Project Director at the Congressional Office of Technology Assessment. Additionally, she has held the roles of Vice President for Economic and Environmental Research at The Wilderness Society, and Program Manager for Technology Programs in the Environmental Protection Agency’s policy office and Senior Associate at the Northeast-Midwest Institute.

Julie serves on the boards of the Endangered Species Coalition, E4theFuture, Clean Production Action and is the board chair of the Sustainable Investments Institute.

Julie received a Ph.D. and Master of Science in resource economics from Michigan State University and a Bachelor of Science in forest management at Northern Arizona University.

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