SEC Pressured to Include Carbon Credits in Disclosure

Environmental groups have urged the U.S. SEC (Securities and Exchange Commission) to include offset purchases in a broader climate for firms to disclose their greenhouse-gas emissions.

Environmental groups (such as Sierra Club, Public Citizen, and Americans for Financial Reform Education Fund) sent a letter to the SEC stating that disclosures about the carbon offset credits markets are critical.

According to the letter, carbon credits have “significant environmental, accounting, and social integrity problems” that jeopardize the climate pledges that companies have made“.

Companies that fail to “report their investments in primary and secondary market offsets… pose a material risk to investors and the financial system“.

The letter urged the SEC to include mandatory disclosures about issuers’ use of offsets in its climate risk disclosure rule.

The SEC’s officials declined to comment on the letter, but an earlier statement from the SEC chief Gary Gensler says he’s working “closely” to firm up details on a mandatory climate-risk proposal.

Many people expected the SEC to release its climate change rule before the end of last year. That deadline has now been pushed back to March at the earliest.

The hope of the new restrictions is to increase openness in the financial markets about climate issues. However, the rule’s progress has been halted by disagreements over how much information the agency may compel corporations to reveal without facing a court battle from industry lobbyists.

Environmental groups aren’t the only ones arguing for carbon offsets disclosure.

Ceres, a nonprofit investor group, made similar remarks, saying, “we recommend the commission carefully consider how carbon offsets should be disclosed”.

The New York State Comptroller is recommending the SEC require disclosure of both quantitative and qualitative information related to carbon offsets.

The voluntary carbon market is growing fast. Trove Research, a data advisory business, predicts that the market will grow by up to 80% by 2022, reaching $1.7 billion.

Former Bank of England governor Mark Carney, who helped establish the Integrity Council for the Voluntary Carbon Market, thinks that offset sales might reach $100 billion by 2030.

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