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New SEC Rule Requiring Companies To Report Climate Data Could Spell Confusion For CRE

In a move that could give new verve to the Biden administration's stalled environmental agenda, the Securities and Exchange Commission has given the initial green light to a new rule requiring public companies to publish disclosures about climate-related risks and greenhouse gas emissions.


By a 3-1 vote, the SEC backed a rule Monday that would give shareholders insight into the risks natural disasters pose to companies, as well as the impact of new government environmental policies and the influence of global climate change on consumer interest in products and services, The New York Times reported.

The proposal might still be amended, and SEC Chair Gary Gensler was unable to say what the time frame will be for implementation, according to the Times. But the proposal is raising early alarms in the commercial real estate industry, with some wondering who, exactly, will be responsible for collecting and reporting such data.

The real estate industry is responsible for about 39% of total global emissions, per the International Energy Agency. Approximately 11% of emissions are generated by manufacturing materials such as steel and cement used in buildings, with the remainder emitted from buildings themselves and by generating the energy to power them.

Michael Biles, partner at King & Spalding's securities enforcement and regulation practice, suggested to that a software company that rents an office from an insurance company may be confused about who discloses electricity emissions.

“[T]he real question is how far will the requirements go?” Thomas Gorman, a partner in the law firm Dorsey & Whitney, said in a statement reported by GlobeSt. “The answer is in probability not as far as some foreign regulators such as the Hong Kong securities commission and the Monetary Authority of Singapore who are leaders in this area have gone. There will surely be a beginning, however, which in probability will be followed by lawsuits.”

Gensler dismissed overreach criticism to Times and didn't comment on potential legal challenges.

Many companies have been reporting climate information voluntarily to this point, the Times reports, but some have received criticism in the past for greenwashing, or deceptively convincing consumers they are following best environmental practices. For example, net-zero carbon standards for buildings can be misleading, Bisnow reported previously, when real estate companies stretch the definition of net-zero to not include emissions from manufacturing glass, steel and concrete, or not including a tenant's emissions.

Rhode Island Sen. Sheldon Whitehouse, a Democrat, told the Times the SEC should go further with the proposal and include disclosures on climate-related lobbying and influencing, adding he believes it is the most material disclosure a company could make.

Gensler says the SEC is responding to broader investor demand for information on climate risks.

“It’s a disclosure regime within a long tradition of disclosure regimes,” he told the Times.