Davis Polk partner and ESG practice head Joe Hall was quoted in Ignites on the potential for the SEC’s proposed climate rule to include requirements for issuers to disclose greenhouse gas emissions, known as Scope 3 emissions. Joe noted that external and internal political pressure could force a proposal to include some form of Scope 3 disclosures. “It’ll be very difficult, frankly, for Chairman Gensler to come out with a proposal that does not come out with some form of Scope 3 disclosure. However, if the disclosure is just completely unmoored by traditional notions of materiality … I think there will be massive pushback on that,” he said.

Joe discussed that the SEC will likely focus on disclosures that are material to investors because that is what they have authority to regulate. He said, “The risk for them is they get a rule at the SEC and then the courts just throw the entire thing out. Everybody has an interest in a rule that is tailored to the SEC’s actual authority, which would presume that it has a materiality qualifier to it.”

SEC’s ESG Proposal Unlikely to Require Vendor Data,” Ignites (March 18, 2022) (subscription required)