The SEC wants to know about your climate impact—and CFOs are on the frontlines

The U.S. Securities and Exchange Commission (SEC) is expected to propose a landmark climate risk disclosure rule today. Public companies will be required to publicly report their environmental footprint.

My Coins2Day colleague Declan Harty explains this in his new piece. “As the standard setter for corporate disclosure across the U.S. Public markets, the SEC finally figures to offer the clarity that investors and companies have been itching for when grappling with climate disclosures,” he writes. “And so far, corporate America has been supportive of the SEC’s ambitions to establish a mandatory regime.”

He continues, “In comment letters to the regulator, Salesforce, Etsy, Apple, and Uber all wrote in support of the measure. Uber even went so far to make it clear that standardization would be a load off its back, too, considering the excess demand for ESG data has ‘created a myriad of cumbersome and time-consuming commitments for companies.’”

A disclosure rule could provide companies some relief by having a better framework for what’s important to report. And investors seek more clarity as well. 

“Investors of all types—from pension funds like the California Public Employees’ Retirement System to sustainability-minded shops such as Trillium Asset Management to BlackRock, the world’s largest asset manager—are pushing for better disclosure,” Declan writes. 

Broadridge CFO Edmund Reese recently told me that institutional investors cast 40% of their voted shares in favor of environmental and social proposals in 2021, the highest level in at least five years, based on the company’s research. These proposals included “hard metrics, specific targets, and objectives from the company,” Reese says. The trend will continue into this proxy season, he says.

In Declan’s report, he highlights the big question of whether the SEC will address Scope 3 emissions—”the most intensive measure of a company’s carbon footprint, given that they include emissions outside the company’s control, like those created by a consumer using its products or those within its supply chain,” he writes. “But scope 3 emissions are also the hardest to calculate.” (You can read Declan’s report in full detail here.)

A new set of rules for climate disclosure means accurately tracking progress and reports will be even more important. “CFOs have the expertise to best lead climate and other ESG reporting efforts, and this information is critical in climate risk mitigation—you can’t manage what you can’t measure,” Wes Bricker told me. Bricker is a former SEC chief accountant and current vice chair, US Trust Solutions co-leader of PwC US. 

“With the SEC’s proposed climate change disclosure rules, CFOs will need to collaborate with leadership across the enterprise to help incorporate climate change into the overall business strategy,” he says. 

That means facilitating upskilling, governance, and reporting to new regulation requirements, Bricker says. “The pandemic created opportunities for finance leaders to become even more strategic partners to leaders across the enterprise—something nearly half of the CFOs said was a top priority in PwC’s U.S. Pulse Survey last year,” he says.

So, get ready CFOs for a new ESG frontier. 

See you tomorrow.

Sheryl Estrada
[email protected]

Big deal

Tableau (NYSE: CRM), an analytics platform, and Forrester Consulting released a study exploring the role data literacy plays in driving business outcomes. About 82% of decision-makers surveyed expect basic data literacy from employees in every department, including operations, HR and, IT, according to the study. And 70% of employees are expected to use data heavily in their job by 2025, up from 40% in 2018. However, there's a disconnect in the perceptions of employers and employees. Although 79% of leaders say they're equipping employees with data skills, only 40% say they're receiving data skills training. Forrester surveyed more than 2,000 executives, decision-makers and employees in 10 countries including the U.S., U.K., Canada, France, Germany, Japan, Mexico, and Singapore. Respondents work at global companies with 500 or more employees.

Going deeper

In Why Employee Wellness Programs Don’t Work, Wharton Business Daily discusses with Wharton management professors Iwan Barankay and Peter Cappelli methods to gauge progress. “What we need to do is listen to our employees. We have to talk to them to understand what their barriers are to start engaging,” Barankay said. 

Leaderboard

Katie Anderson was named EVP and CFO at Neiman Marcus Group, effective April 4. Anderson formerly served as CFO at Guess, Inc. Prior to this, she served as CFO at California Pizza Kitchen and Sprinkles. Anderson started her career in investment banking at Citigroup, Inc. And then Moelis & Company.

Bobby Lavan was named CFO at Bally's Corporation (NYSE: BALY), a global gaming, hospitality and entertainment company. Steve Capp, Bally's current CFO, is leaving Bally's to pursue other interests and opportunities. He will continue to support the business through the end of April. Lavan has been SVP of finance and investor relations at Bally's since May 2021. Prior to joining Bally's, he was CFO at NYSE listed Turning Point Brands and CFO at General Wireless Operations.

Overheard

"We may only be in the early stages of a Cold War. Or if not a Cold War, clearly a cold conflict."

—Dr. Sanjai Bhagat, provost professor of finance at the University of Colorado at Boulder's Leeds School of Business, answers the question of whether the U.S. Is in an economic cold war with Russia, as reported by Coins2Day.