MBA Letter Offers SEC Recommendations on Climate-Related Risk, Greenhouse Gas Emissions

The Mortgage Bankers Association on Friday submitted a letter to the Securities and Exchange Commission on its notice of proposed rulemaking on new mandatory disclosures related to climate-related risk and company greenhouse gas emissions.

The letter expresses MBA’s view that the proposed rule is not necessary to achieve the SEC’s objective of ensuring investors are provided with decision-useful information about climate-related financial risks, noting public companies already are required to disclose material information.

“[This] would include information regarding a company’s material climate-related financial risks,” the letter said. “It appears, therefore, that the objective of ensuring companies disclose material information could be addressed under current rules.”

The letter also offers the following recommendations:

–Reporting of Scope 3 GHG emissions, including emissions from properties securing mortgages, should be voluntary, noting GHG emissions are not really related to climate-related risks).

–All new mandatory Regulation S-K climate-related risk reporting should be limited to “material” information. “The Commission has long recognized that disclosure of immaterial information does not serve investors’ interests, and mandatory disclosure of immaterial information may mislead investors into believing the information is more important than it really is,” the letter said.

–The SEC should not add new (and unworkable and non-decision-useful) Regulation S-X notes to financial statements on the impacts of severe weather events.

–The projected implementation schedule should be extended by at least two calendar years.

“In addition, for purposes of this comment we note that the objective of the proposed rule is to provide investors with information relevant to a reporting company’s climate-related financial risks, and that any efforts to require companies to disclose climate-related information for other purposes – for example, to provide information related to a company’s impacts on the environment– would therefore be the subject of a different rulemaking under different legal authority,” the letter noted.

MBA also joined a real estate industry letter commenting on the proposal submitted last Monday.