We believe our proposed changes support all market participants' common objectives of investor protection and fair and efficient capital markets.

On June 16, 2022, Jones Day submitted a comment letter (the "Letter") relating to the U.S. Securities and Exchange Commission's (the "Commission") proposed new and amended rules and forms, as set forth in Release Nos. 33-11042 and 34-94478, concerning climate-related disclosures for investors (the "Proposal"). We support the Commission's mission of protecting investors, maintaining fair and efficient capital markets, and facilitating capital formation generally and, in this case particularly, as it pertains to climate change. That said, we have identified three primary areas of concern with the Proposal that are difficult and impractical for many companies to implement and, in fact, may have the effect of undermining the Commission's stated goals of promoting efficient allocation of capital, capital formation, competition, and the maintenance of fair and orderly markets:

  • Implementation challenges, costs, and risks. The Proposal adopts a prescriptive, one-size-fits-all approach (as opposed to a principles-based, industry-specific approach) that would impose significant administrative, logistical, and financial burdens on reporting companies.
  • Potential chilling effects. The burdens of meeting the disclosure requirements of the Proposal have the potential to chill companies' current good faith efforts to develop plans, goals, and targets to reduce emissions and other environmental impacts associated with their businesses and operations, and may compel some companies to opt out of these important practices.
  • Competitive harm. The Proposal mandates that companies disclose what has typically been regarded as confidential strategic information, including internally developed analytical tools and financial metrics such as scenario analyses and an internal carbon price, all of which are important parts of companies' environmental and strategic planning, and the disclosure of which would likely result in competitive harm.

To address these concerns, the Letter requests that the Commission consider various changes, including reevaluating the cost-benefit analysis underlying the Proposal, clarifying certain concepts and definitions, providing exceptions to audit requirements with respect to analyzing climate-related impacts on certain financial statement line items, considering the potential increased litigation risks, and including industry-specific disclosure standards. We believe our proposed changes support all market participants' common objectives of investor protection and fair and efficient capital markets.

A copy of the Letter is available here.