The number of US listed firms making some sort of Scope 3 disclosures has jumped by 67 percent since the Securities and Exchange Commission released its proposed climate disclosure regime in March, according to research by MSCI.

Under the regulator’s proposed rules, companies would be required to disclose their value chain emissions known as Scope 3 – if they are material or if they have included them in climate targets.   

Speaking on a panel about the rules at the RI USA conference in New York last week, Julia Giguere-Morello, head of America core ESG and climate research at MSCI, highlighted the “momentum” that has been seen on Scope 3 disclosures since March.

She said the firm’s research showed that in the six months or so since the SEC’s proposal was published, the number of US listed firms disclosing at least some of their value chain emissions has jumped from 15 to 25 percent, based on a sample size of 2,565 firms. 

“Even more interesting”, she said, is the movement seen by companies in the emissions-intensive materials, utilities and energy sectors, where the number of firms making some sort of disclosure has increased by 18, 33 and 19 percentage points, respectively. 

Given the anti-ESG pushback in the US, there are real concerns that the SEC climate rule will face legal challenges. 

Yet Curtis Ravenel, founding member of the TCFD and senior adviser to GFANZ, who was also on the panel, said that even if the “worst case scenario” occurs and the SEC rules get “tied up in litigation forever… it doesn’t matter”. He argued that “private regulation”, such as norms established through investor networks and the far-reaching legislative approach coming out of Europe, will continue to drive things.   

“Anyone of any size in the US and doing any kind of business in Europe is likely to be captured by those rules,” he said, adding that his first recommendation is that firms “need to build institutional capacity for this”. 

Backlash fears

Speaking on another panel at RI USA, Andrew Howell, director of investor influence at US nonprofit the Environmental Defense Fund, gave insight into the impact of the anti-ESG movement. He recounted how one bank was reluctant to enter into an email exchange with him due to fears that the interactions could be subpoenaed as part of a future investigation.  

Ultimately, Howell said the backlash will not cause “lasting damage to what is an inexorable march”. He acknowledged, however, that it will have a “chilling effect, in the very least, on what financial institutions are saying publicly”. 

Meanwhile, Steven Rothstein, managing director at US nonprofit Ceres, emphasised the recent shift on climate risks among US financial regulators.

He noted that, towards the end of the Trump administration, he tried to ask a “senior person” at the Federal Reserve about climate risk. “And they said, ‘I think you have the wrong number. Let me give you the Environmental Protection Agency phone number’. 

“Clearly you don’t get those answers today… Now almost every single federal financial agency has taken a position on climate.”