SEC climate disclosures are ‘more about what investors do with the information’: Strategist

KPMG U.S. Impact & ESG Leader Rob Fisher sits down with Yahoo Finance Live to talk about the SEC mandate on companies disclosing climate-related data and financial figures and how they may differ from company to company.

Video Transcript

BRAD SMITH: Welcome back to Yahoo Finance Live, everyone. The SEC is putting forward rules which take aim at environmental social governance transparency among companies. For more on how this may take shape, let's bring in Rob Risher, who's the KPMG US impact and ESG leader joining us. Now, Rob, it's good to have you here with us on the day. Help us break this down a little bit further. From what you gather on the matter, what exactly is the SEC proposing here?

ROB FISHER: Yeah, Brad, first, thanks for having me. I really appreciate it. But the SEC has essentially put forward a proposal, and obviously, that's draft. There will be a whole comment period, and I'm sure it will evolve in terms of what the final form looks like.

But what we're going to see is a set of climate-related financial disclosures. How does an organization govern the program? How are they setting targets and goals? Are they using an internal price on carbon for decision-making, as well as some very specific quantified metrics that will be included around their emissions. And some of those are going to be in the notes to the audited financial statements. So I think that's a pretty interesting development.

BRAD SMITH: OK, and so that's particularly interesting because some of the metrics that a retail company might put forward would be far different from the metrics that an oil and gas company would put forward. So what is that standard going to look like?

ROB FISHER: Yeah, so the standard is going to be the same for everyone in terms of, for example, quantifying their scope one emissions, which refers to how much they emit in their operations, as well as the electricity they use and other energy sources that are scope two emissions, as well as their entire value chain, what they call so so-called scope three emissions.

And those can be very different, but they're going to be disclosing in a consistent way. And you'll be able to compare based on total emissions, but also the intensity of those emissions. So you can look across and have appropriate benchmarks between organizations that are in similar industries, which think investors, in particular, are going to really appreciate.

BRAD SMITH: Something that we often discuss here on the network for our viewers as well and bring to the light is when companies like an Amazon or an Apple or a Nike, they're putting out some of their own emissions in their efforts to get to kind of carbon zero, if you will. At the end of the day, they've been able to set their own frequency. Now that the SEC is entering into the chat, if you will, what type of frequency or cadence should we expect to see?

ROB FISHER: Yeah, well, I think that what we're seeing here is there'll be at least an annual requirement to include some of these disclosures we're talking about. And that will start with the year 2023 reported in 2024. And it'll phase in. Different companies of different sizes will have different requirements coming in. But so we'll expect to see that in pretty short order.

But I think, Brad, you make a great point, right? Everyone's been able to tell their own narrative their own way and disclose what they want to disclose and not disclose what they don't want to. And so now we're going to be moving into a time frame where we're going have more of an apples to apples comparison. So here at KPMG, we see that leading organizations are probably quite excited about the possibility to be able to tell their story their way, using a consistent playing field, if you will, from a reporting perspective.

BRAD SMITH: So is there a proposed penalty that they are putting forward for not reporting or for not being as transparent as they should with that reporting?

ROB FISHER: Well-- and I'll have to caveat by saying it's a 500-page rule that came out today. So we're still fully digesting all of it.

BRAD SMITH: Ctrl+F, Rob, Ctrl+F.

ROB FISHER: [LAUGHS] So I think what we'll see, though, is that it'll be more about what investors do with the information, right? Companies have a real opportunity to demonstrate the value that they're creating in their program. So what is their transition plan? What are the targets they've set?

And having the data themselves, to be able to monitor that is really critical. Boards and management are really going to have to roll up their sleeves to say, do we have the right programs in place? And a lot of the requirements say, if you have a transition plan, disclose that. If you are using an internal price on carbon.

So I think investors are going to look at it and say, if you're not including those things, what does that say? So I think maybe that's where-- there won't be an explicit penalty, but I think investors will drive where this goes.

BRAD SMITH: Ahead of any rollout, how have companies who prioritize ESG measures, how have they performed financially?

ROB FISHER: Yeah, I think we've seen there are a number of different studies out there that show that they perform at least as well as in a number of the studies better than companies that haven't focused on these ESG topics. And I think it's because if you're focused on things that matter to your customers, that matter to your employees, that's naturally going to translate in a strategy that is well aligned to where the market is headed. And so we have seen that that's been a very positive thing from a return perspective.

BRAD SMITH: Rob Fisher, KPMG US impact and ESG leader, thanks so much for joining us and having this conversation with us today. We'll see how this moves forward with the SEC, given the proposal that is 500 pages long from what we understand right now. Appreciate the time, Rob. Thanks for joining.