CREFC Submits Response to SEC’s Climate-Related Disclosure Proposal
June 6, 2022
On June 10, CREFC’s Sustainability Initiative submitted its response to the Securities and Exchange Commission’s (SEC) climate-related disclosure proposal. CREFC’s comment letter reflects perspectives from across its membership, taking into account recommendations from investors, issuers, banks, accounting firms, rating agencies, and other industry participants. Key recommendations included:
- Longer Implementation: The final rule should be subject to a longer implementation period to allow market participants to continue to develop best practices over time. The SEC’s proposal repeatedly refers to an adoption period of December 2022 for “illustrative” purposes. Given the breadth and depth of the proposed requirements, we believe a year-end adoption date is too aggressive.
- Industry Efforts Ongoing: The SEC should allow the CRE finance industry to develop its own best practices to address climate change risk. CREFC has analyzed what climate-related information is obtainable, relevant, and meaningful for borrowers, lenders, servicers, issuers, and investors, and has developed preliminary climate-related data fields that can be incorporated into the existing CREFC Investor Reporting PackageTM (“IRP”). On several different occasions over the past year, CREFC leadership has shared with SEC commissioners and staff members the progress being made in the IRP update.
- Safe Harbors: If Scope 3 disclosures are required for the CRE finance sector, the SEC should grant appropriate industry-specific safe harbors and exemptions, only require disclosure of reasonable estimates once per year, and allow for a delay in implementation. A Scope 3 safe harbor should provide protections (1) for which information from third parties is presumed to be reasonable and that (2) no reporting would be required with respect to legacy transactions for which registrants have no legal right to obtain necessary information.
- Data Availability: The SEC should require Scope 1 and 2 disclosure only after a registrant possesses a full 12 months of actual emissions data for the prior fiscal year, and after such time as such data has been examined and verified using commonly accepted standards for the CRE market.
CREFC also submitted – on behalf of partner real estate trade associations – a joint letter offering similar recommendations in response to the SEC proposal.
We will continue to keep our membership apprised of related developments at the SEC, as well as other regulatory or legislative activity related to ESG and the CRE sector.
Please contact Sairah Burki with any questions. We look forward to a lively conversation on these and other ESG topics at CREFC’s Sustainability Summit on Wednesday, June 15.