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Green groups want offsets to be disclosed as part of SEC’s climate rule

(Bloomberg) — Environmental groups have called on the U.S. Securities and Exchange Commission to make offset purchases part of a broader climate rule that would force companies to disclose greenhouse-gas emissions.

Many expected the SEC to unveil its climate rule by the end of last year. That timeline has now slipped to March or even later. In a letter published Thursday, the Sierra Club, Public Citizen and Americans for Financial Reform Education Fund said the disclosures about offset markets are a significant part of it because they have “significant environmental, accounting and social integrity problems” that can affect companies. endanger climate pledges. have been making.

The letter said the failure by companies to “report their investments in primary and secondary market offsets … poses a significant risk to investors and the financial system,” adding that the SEC has been asked about issuers’ use of offsets. Must include mandatory disclosure. Climate Risk Disclosure Rules SEC officials declined to comment about the letter.

The new rules are seen as a way for the SEC to bring more transparency about climate risks to financial markets. But the rule’s progress has been embroiled in a debate over how much information the agency can force companies to disclose without losing an almost certain legal challenge from business lobbyists.

Two-thirds of companies in seven industries combined, representing 64% of global emissions, rely on offsets rather than emissions reductions to reach net zero, according to a recent analysis by the Columbia Center on Sustainable Investment. This number is worrying because study after study has indicated that most offsets available on the market do not reduce emissions reliably.

The promise of an offset, in theory, is that it is a payment to an entity somewhere in the world that will undo the pollution a company puts into the atmosphere. If it works, companies can reduce those emissions with their carbon lasers. In reality, however, experts say that most offsets available in the market fail to deliver on that promise.

The ambiguity in the offset markets only makes matters worse. According to a Bloomberg analysis of registry data compiled by the Berkeley Carbon Trading Project and Carbon Direct, about half of all carbon credits sold in the voluntary market do not have details about who bought them.

That’s one reason why it’s not just environmental groups that are making the case for offset disclosure. In response to the SEC’s public consultation of the Comprehensive Climate Rule, the State Comptroller of New York wrote: “We recommend that the Commission require the disclosure of both quantitative and qualitative information relating to carbon offsets, such as those to reach carbon targets. The amount of carbon offset used and the processes to ensure the carbon offset is reliable.”

Similar remarks were made by the non-profit investor group Ceres, which said that “we recommend the Commission to give careful consideration to how carbon offsets should be disclosed,” adding that “most of the science- based targets do not count towards carbon offsets.”

The voluntary carbon market is growing regardless. Data advisory firm Trove Research expects the market to expand by 80% in 2022, reaching $1.7 billion. Former Bank of England governor Mark Carney, who helped establish the Integrity Council for the Voluntary Carbon Market, estimates offset sales could reach $100 billion by 2030.

– With assistance from Demetrios Pogkas and Benjamin Bain.

To contact the authors of this story:
Natasha White in London [email protected]
Akshat Rathi in London [email protected]

© 2022 Bloomberg LP

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