Sustainable Finance Newsletter - Corporate climate info at the price of a company party

Broadridge Financial Solutions

18/10/2023 17:00

By Ross Kerber
       Oct 18 (Reuters) - A pair of new California laws
requiring corporate climate disclosures has raised cost concerns
from business groups. Exactly how much extra they will pay seems
murky, but some firms already make similar disclosures for
around $533,000 a year.
    
That figure comes from a past study that has gotten new
attention after California Gov. Gavin Newsom signed the new laws
on Oct. 7. You can read about the figure below, and how it has
set expectations for a separate new rule the top U.S. securities
regulator has been promising for months now.
    
This week I've also flagged a story on Big Tobacco's workaround
for an upcoming European Union ban on flavored heated products,
and a cool read about high-tech sails to cut fuel consumption by
a dry bulk carrier ship.
    
I invite you to connect with me on LinkedIn where I welcome
comments and feedback. Or if you have a news tip, potential
content, or general thoughts please email me at
ross.kerber@thomsonreuters.com
    
    This week's most read
  
* Surging rents lift US consumer prices; underlying inflation
grinding lower
* Berge Bulk launches wind power-aided ship to cut emissions
* EU to push for COP28 deal on phasing out fossil fuels
    
    Climate reporting for the cost of a holiday party
  
Business groups have criticized new and proposed
climate-disclosure requirements, saying they will impose new
costs on companies to prepare emission reports.
    
Many firms already issue this data, providing a measure of what
others can expect to pay. The most detailed figures I've seen
come from a 2022 survey that put average spending at $533,000 by
companies already making disclosures that would be required
under proposals from the U.S. Securities and Exchange Commission
(SEC). 
    
Several analysts told me that figure is comparable to the
spending companies will have to make under the new California
requirements - hardly a lot of money for big firms that, in many
cases, already issue similar reports.
    
"About two-thirds of the companies out there can get this data
with an additional investment that probably amounts to what they
spend on a big holiday party," said Elizabeth Saunders, a
strategic advisor at Riveron, which provides climate risk
management and consulting services.
    
Findings of the survey from ERM Group's "SustainAbility
Institute" have gotten new life since Newsom on Oct. 7 signed
two bills setting out new obligations for companies operating in
the largest U.S. state.
    
The first bill, SB253, calls on companies with more than $1
billion in revenue to disclose scope 1 and scope 2 emissions
plus so-called "scope 3" emissions like those resulting from use
of their products. The second bill, SB261, requires companies
with $500 million or more in revenue doing business in
California to report on risks stemming from climate change such
as rising sea levels or extreme weather.

The laws overlap with a proposed SEC rule that would require
some Scope 3 reporting and which the agency says would cost
companies around $530,000 per year. The SEC has delayed
finalizing the rule as top business groups have sought to narrow
its requirements, worried that the agency's cost estimate is too
low.

    Some U.S. lawmakers have argued that passage of SB253
basically eliminates the cost of meeting a Scope 3 federal
disclosure requirement for companies operating in California,
which includes a large share of top U.S. stock issuers. 

Neither Newsom nor the California Chamber of Commerce commented
on the ERM study. As Newsom signed the bills on Oct. 7, he said
he was concerned about costs and would look to streamline
requirements.
    
    Democratic State Senator Henry Stern, one of the bill
sponsors, said the ERM figure of $533,000 was "as good an
estimate as any" of the combined costs of the new laws to
businesses. But many companies have already embraced such
spending and the laws should actually drive down expenses by
making climate reporting routine, he told me in an interview.
  
        
  
Julie Gorte, senior vice president at Impax Asset Management,
said the $533,000 figure is "in the ballpark" for what most
companies would wind up spending on the new California
requirements, if they are not already issuing such reports. "The
interesting thing is that for small companies it could cost a
lot less because they have less to report," Gorte said.
    
ERM's survey was based on 39 responders with market
capitalizations ranging from less than $1 billion to over $200
billion.
             
    Company news
  
Exxon's $59.5 billion deal to buy shale rival Pioneer aims to
cut greenhouse gas emissions from operations even as it boosts
oil and gas production, executives said. Top investors do not
seem to be in a mood to challenge the claims, as this story
explains. 
        
  
Looking to counter an EU ban on flavored heated products, top
tobacco companies including British American Tobacco are selling
heat sticks made from nicotine-infused substances such as
rooibos tea. It may be a smart business workaround but this
rundown notes the lack of published research on health effects.

U.S. drugstore chain Rite Aid sought bankruptcy protection on
Sunday, listing problems including debt, falling revenue and
mounting competition. It also faces about 1,600 lawsuits and
legal actions over its handling of opioid prescriptions, as you
can read here.

    On my radar
  
Carbon credits started trading on the Tokyo Stock Exchange last
week. If successful the mechanism will help create an emissions
trading system to help the country reach net-zero goals.
      
I look forward to reading John Coates' new book The Problem of
Twelve, about the growing concentration of power by top index
fund firms and private equity companies that he worries are 
crowding out traditional means by which shareholders control  
corporations.  
    
Retail shareholders are becoming a bigger constituency, owning
31.5% of shares during the 2023 proxy season, the highest level
in five years and up from 29.6% five years ago, according to a
recent memo from Broadridge Financial Solutions. 

Council of Institutional Investors Executive Director Amy Borrus
will retire next spring after three years leading the
Washington, D.C. group that has become an influential voice for
top state and local pension plans, it said in a press release on
Tuesday.

 (Reporting by Ross Kerber in Boston. Additional reporting by
Isla Binnie in New York; Editing by David Gregorio)
 ((ross.kerber@thomsonreuters.com; (617) 412 0093;))