June 24, 2022
REsurety’s letter to the Securities and Exchange Commission Re: File No. S7-10-22, dated June 17, 2022
On behalf of REsurety, Inc., a leading analytics provider in the clean energy economy, we are writing in support of File No. S7-10-22: The Enhancement and Standardization of Climate-Related Disclosures for Investors. We also suggest two specific language refinements to improve the accuracy and transparency of Scope 2 emissions disclosures.
Anticipated Value of the Proposed Rule
For the last 10 years, REsurety has helped our clients understand the risks and value of buying and selling electricity from clean energy projects. Many of our clients develop renewable energy projects, have made voluntary public GHG reduction commitments, or own assets exposed to climate-related risk. The SEC’s proposal to require detailed climate-related disclosures has the potential to benefit our customers, as well as the public and the planet. By requiring disclosures from a large category of companies, the proposal protects investors from unintentional exposure to climate-related risk. By standardizing disclosure requirements and requiring attestation, the proposal can also help substantiate GHG reduction claims. In short, the proposed rule has the potential to increase efficiencies in capital markets, boost investor confidence and encourage companies to take effective climate action at scale.
Challenges with the GHG Protocol
While we strongly applaud the SEC’s aims, we are concerned about the pivotal role the GHG Protocol plays in the SEC’s proposal, particularly with respect to Scope 2 emissions disclosures. The proposed GHG emissions disclosure requirements are based “primarily on the GHG Protocol’s concept of scopes and related methodology”.1 The proposed rule cites the GHG Protocol Scope 2 Guidance as a methodological source for determining Scope 2 inventories.2
The GHG Protocol Scope 2 Guidance allows reporting entities to select from an extensive hierarchy of emissions factor data to calculate their footprints. Application of some of these emissions factors would result in footprints that differ materially from actual GHG emissions. For example, the current Scope 2 Guidance lists Renewable Energy Credits (RECs) as the highest-quality “emissions factor” data type but takes no position on where or when RECs are produced relative to their consumption. An entity consuming power in a coal-heavy grid could eliminate its Market-Based Scope 2 footprint by purchasing sufficient RECs from a very clean grid, even when such a purchase would have a negligible effect on actual GHG emissions.
By relying on average emissions factors, current Scope 2 guidance also risks sending signals to registrants that are at odds with the goal of reducing carbon emissions. Consider a registrant purchasing solar energy that mostly displaces coal generation, in a grid that also includes considerable baseload nuclear. Since the average emissions rate of this grid is much lower than the emissions rate of the displaced coal, the reduction in the registrant’s carbon footprint would not reflect the solar energy’s full carbon impact. As a result, the registrant may hesitate to contract for the solar energy in the first place, knowing that its actual carbon benefits could not be reported.
We love talking with anyone who shares our goals of more accurate carbon impact measurement and the tools to maximize that impact – so please contact us at [email protected] if you have any questions or want to connect and discuss.
 Proposed Rule, §I.D.2.
 Proposed Rule, §II.G.2.c (p. 195). The proposed rule also cites the EPA’s guidance on Indirect Emissions from Purchased Electricity, which is highly similar to the GHG Protocol Scope 2 guidance. See §II.G.1.b. (p. 160)