The SustainAbility Institute by ERM (‘ERM’) conducted a survey of corporate issuers and institutional investors to understand what U.S. private sector organizations currently spend measuring and managing climate-related disclosure activities. The survey was conducted February-March 2022. Ceres and Persefoni commissioned the survey to help inform mandatory and voluntary climate disclosure guidelines and methods being developed by regulators, standard setters, and individual firms. Specifically, the survey findings are intended to inform discussions related to the US Securities and Exchange Commission’s (SEC) recent proposed Rules on Enhancement and Standardization of Climate-Related Disclosures for Investors. Given the ERM survey aimed to assess a broad range of corporate costs connected to climate-related disclosure activities, and because the survey was designed before the draft SEC rule was released, the survey included cost categories not strictly aligned with potential SEC disclosure requirements.
Biggest areas of spend for climate-related disclosure activities
Among issuer respondents that shared their costs for climate-related disclosure activities, the three largest cost categories are:
- Greenhouse gas (GHG) analysis and/or disclosures ($237,000 average annual cost for those reporting spend in this category).
- Climate scenario analysis and/or disclosure ($154,000 average annual cost for those reporting spend in this category).
- Internal climate risk management controls, namely the costs related to integrating climate risk into business processes ($148,000 average annual cost for those reporting spend in this category).
The three largest cost categories among investor respondents are:
- External ESG ratings, data providers, and consultants ($487,000 average annual cost for those reporting spend in this category).
- In-house, outside counsel, and proxy solicitor analysis of shareholder voting for ballot items related to gathering climate risk management information ($405,000 average annual cost for those reporting spend in this category).
- Internal climate-related investment analysis ($357,000 average annual cost for those reporting spend in this category).
Areas of spend beyond proposed SEC rule requirements
ERM’s survey included two cost categories not directly aligned with potential SEC disclosure requirements. Firstly, the survey examined costs related to proxy responses to climate-related shareholder proposals, which have become a common feature of annual proxy season. Almost half (49%) of issuer respondents reported costs in this category, generating an average annual spend of $80,000.
Secondly, the survey explored costs involved in voluntarily taking on additional climate-related analyses and disclosures such as developing low-carbon transition plans, undertaking stakeholder engagement and government relations, and the preparation of related disclosures. Over three quarters (77%) of issuer respondents indicated spend in this category, with an average reported spend of $130,000. The SEC proposal would not require companies to develop transition plans, and disclosure of transition plans would only be required where companies have chosen to develop them.
When these activities which are not required under the SEC’s proposed rules are taken into account, the survey finds that corporate issuers currently spend an average of $677,000 annually on climate-related disclosure activities.
Measurement of Scope 3 emissions
ERM’s survey asked all issuer and investor survey respondents to indicate whether they currently measure their Scope 3 GHG emissions as a possible indicator of their overall commitment to using climate-related metrics.
For issuer respondents, 74% reported that they currently measure Scope 3 emissions.
Among investor respondents, for whom Scope 3 consists largely of financed emissions (i.e. emissions from assets in which the firm invests via debt or equity), 44% reported that they currently track their Scope 3 emissions.
Read the report to find out more.