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NEWS: What Y’All Said on the SEC Climate Disclosure Proposal

Key Takeaways

Off the Books takes on the news! The Securities and Exchange Commission has received thousands of comments on its climate risk disclosure proposal. Catherine and Steve break down what stands out from the feedback on the proposed SEC climate disclosure rule. Tune in:


Want more on this topic? We've also summarized the comments on the blog.

Season 3, Episode 20: NEWS: What Y’All Said on the SEC Climate Disclosure Proposal | Transcript

Steve Soter: Hello, and welcome to Off the Books, where we surf the uncharted waters of accounting, finance, risk, and wherever else the waves take us. This episode is brought to you by Workiva, the risk, reporting, ESG, and compliance platform that simplifies your complex work so you have more time to throw some more shrimp on the barbie this summer. Check it out at My name is Steve Soter, accounting enthusiast and Diet Coke aficionado. I'm looking forward to debiting a great conversation, and I'm happy to have you with us. I'm also very happy to have Catherine Tsai joining me. Catherine, can you please tell the fine folks who you are?

Catherine Tsai: I'm not an accountant or Diet Coke aficionado, but I like asking questions and finding answers. And now that the public comment period has closed for the SEC's proposed climate risk disclosure rule, I wanted to dig into the comments that people submitted. What do you think about that, Steve?

Steve Soter: Well, I appreciate the opportunity to talk about it. Feels like I talk a lot about ESG these days, and we've been talking a lot about it on the podcast, too. We just had that episode with Mandi McReynolds talking about her personal reaction and some of my thoughts. But today, Catherine, as you mentioned, the SEC's comment period has closed, and we have a chance to go back and look and see what people said about it. And to tell you the truth, it was all across the board. Lots of support, lots of dissension, and plenty that the SEC is going to need to digest.

Catherine Tsai: I'm curious, what were you hoping to see when you dug into the letters?

Steve Soter: Well, you know, as I mentioned in that episode with Mandi and our conversation there, I do think that 1% breakout in the financial statement footnotes poses some logistical problems for SEC practitioners. But I was also expecting comments to talk about maybe relaxing some of the audit requirements, as well as some of the timing. You know, timing is another big thing of when you're going to be able to get all of this stuff done. And is that going to be in enough time to have it ready for a 10-K? And I would say that I was not disappointed because a lot of those things were evident in the comment letters that I looked at.

Catherine Tsai: So, there were several thousand comments that came into the SEC. What stood out to you, Steve?

Steve Soter: It's a great question. So more than several thousand, actually. By my count, there were almost 15,000 responses to this proposal, which, to tell you the truth, I don't know if that's a lot or maybe it's not a lot. I suspect that was, though, maybe on the high range of what the SEC could expect.

Catherine Tsai: A bunch of them were form letters, right?

Steve Soter: Well, yeah, exactly. So, there was about 11,000 form letters, where basically somebody took a letter and just resubmitted it under their name. Some of them were a little humorous. You know, one of the things that stood out to me is that there were a lot of farmers actually that responded because they weren't happy about maybe having to disclose their Scope 3 emissions, or provide emissions data for their customers who may be public companies and might have to disclose it. There were some other interesting ones where the Virginia energy industry actually had a ton of form letters. That was another one. People, I guess, in the state of Virginia talking about how they didn't want to you know, they wanted companies to be disclosing this so that would have some impact on their energy cost. I thought that was interesting. There was another one that was talking about how they wanted to include Scope 3 emissions and disclosure on indigenous rights, just transitions for dislocated workers, and community-level impacts. Which then begs the question if they read the proposal, since only one of those things I think seems to be addressed there. Not to make light of it, but it is interesting when it comes to form letters, right? You kind of never know what you're going to get and who's going to submit it.

Catherine Tsai: I'm sure they'll be happy that at least you read their form letter.

Steve Soter: Well, I did read their form letter. Hopefully they're happy.

Catherine Tsai: I also wanted to ask about what the Big Four was saying about the rule, or the proposal. Did you read any of their letters?

Steve Soter: Yeah, you know, I did. I took a look at a few of them, and I'm not going to use names here to protect the innocent. I was surprised at how different they were. One of them was actually fairly short, in my opinion, didn't provide a lot of specific suggestions for the SEC to consider. And actually, it was a little difficult to read. There was another one, though, in particular that was fairly lengthy. It provided a nice executive summary and then a whole lot of data and points behind it. And one of the things that I thought was interesting about that letter is that it echoed, number one, a lot of the concerns that I think other people have had in terms of the timing, you know, how fast it's going to be for companies to comply with this proposal if it gets adopted, as well as that breakout of the 1%. You know, we talked about that in a previous episode again with Mandi McReynolds at Workiva. And that, I think is going to provide some really, really tough logistical challenges. And so, you know, one of the firms that I looked at actually called that out. I did find that very interesting. One other thing that I'll point out, though, about the Big Four is that they probably stand to gain a ton from this proposal because you're going to need to provide audited and attestation work on your greenhouse gas emissions. Well, those firms are going to be in probably the best position to provide that work. So, I actually wondered if they were going to opine one way or the other, and one of them actually did. And one of them said, you know what, we want the highest level of assurance, we think that's going to be important. And as it would be, they probably stand to gain the most actually from that position. So it'll be interesting to see how the SEC, you know, reacts to that comment in particular.

Catherine Tsai: Yeah, good point. As far as financial executives, what did they have to say about the proposal?

Steve Soter: Well, you know, I looked at a letter from FEI's CCR committee. That's the Committee on Corporate Reporting. And this represents, I'd say, maybe kind of the all-star team of accountants in, you know, at least primarily U.S.-based companies where you've got controllers and chief accounting officers. And they had some really, really good points that I think echoed a lot of the concerns that I had. Among them was, again, this breakout of the 1%. I know I keep going into that, but one of the things that they had in their letter was actually a really good example. And I normally wouldn't, you know, read stuff on a podcast. It should be a little more conversational. But so I don't mess it up let me just share this with our audience. So it talks about the example of romaine lettuce. So it says, "Consider a retailer impacted by severe weather events that reduces the supply of romaine lettuce. Suppliers may increase prices to cover those costs, which would increase the cost of sales to the retailer. The retailer may pass along a portion of those rising costs to their customers. Costs passed on to customers may result in increased revenues, or customers' buying patterns may change. For example, certain customers may stop purchasing romaine lettuce and may purchase iceberg lettuce or spinach instead. Unused romaine lettuce may go to donations that are treated as charitable expenditures. In addition, a customer that decided to stop purchasing romaine lettuce due to rising cost may also stop purchasing carrots, tomatoes, peppers, croutons, and dressing, or may instead spend the money that would have gone toward these new items on other products or services." Anyway, I'll kind of stop reading that example, but if you think about all the kind of the iterations of impacts that could be had by climate, it really poses a difficult accounting question and disclosure question. And I think that's what FEI is highlighting here. It is a terrific example, in my opinion.

Catherine Tsai: Any time we can incorporate food into the podcast, I'm all for it. So good job there.

Steve Soter: Right? Well, it's about snack time for me, so maybe the timing's not so great.

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Catherine Tsai: You helped draft a response to the SEC proposal from the SEC Professionals Group. And so I wanted to ask you a little bit about that letter. First of all, what went into drafting that letter? How did you get people's feedback?

Steve Soter: Yeah, it's a great question. So I talked about the SEC Pro Group, but I get to serve as the Executive Advisor, which is to help our National Director and those who are really involved in the community have the resources that they need. And because I'm a former practitioner, I can provide a little bit of insight. So what we did was we kind of had a request for comment across all of our members. We had those who are -

Catherine Tsai: How many members do have?

Steve Soter: So, you know, total over kind of a lifetime, and I'll explain what I mean by that in just a minute, we're well over 10,000. And the way we define a lifetime member is that somebody at one point who was involved in the community. People change jobs. They move around, so sometimes they're really active, sometimes they're not. But that number is well north of 10,000. And those who raised their hand and said that they wanted to participate in the process actually wrote their own letters. And it was my job to kind of consolidate them and put them together and then ultimately submit a response under my name as the Executive Advisor. So, I think if you search for Steve Soter, something might come up there. We've done it a handful of times. And it was really interesting to see how kind of individual companies would be impacted, and trying to kind of mash that all together was a little bit of a challenge, but our letter highlighted a lot of the same things, actually: the timing, the 1% breakout, aligning to global frameworks, those kinds of things. It was really interesting to, again, as an example of how companies might struggle if they had to actually go forward with this proposal.

Catherine Tsai: I want to call out one thing from the SEC Pro Group letter that stuck out to me was there was a suggestion in there that maybe some of these disclosures could come in Form SD.

Steve Soter: Yes. Yes. The doomed Form SD. So for a little bit of background, our audience might remember a Form SD on conflict minerals. And if I'm not mistaken, this was 2015, 2016. Ultimately, that requirement to disclose any impact that your products might have related to conflict minerals from the Democratic Republic of the Congo, ultimately, that kind of got struck down as a freedom of speech issue. And I'm not a historian, but it was kind of a doomed proposal, excuse me, doomed reporting requirement. But one of the things that our members highlighted was, hey, maybe instead of having these climate disclosures on a Form 10-K that has to be filed in, you know, late February or March, if you're a calendar year company, why don't you instead put that on Form SD? Still have the attestation requirements and everything else. But that form's generally not due until the end of May. Might that not be better timing to give companies an opportunity to work through all of this in the proposal? I actually thought it was a great, great thought and a great comment. We'll see what the SEC does.

Catherine Tsai: Especially since it seems like a lot of sustainability reports come out more in that May-June timeframe than in the January-February timeframe.

Steve Soter: Yeah, that's exactly right, because you're going to need to have all this stuff kind of aggregated, audited. All of that work would generally need to be done, you know, again end of February, March. That is very inconsistent with typically how companies handle that today when a lot of this stuff is happening in the spring. I mean, if you think about it, for example, I may need to pull invoices from my suppliers. I may need to have a chance to go through all of that and see how much I bought or consumed, then take that data and figure out what those emissions might be as a result of what I consumed. That's going to take time. Probably not going to be able to happen in a couple of months. So doing it on some form like SD that's not in a 10-K or at least pushing the due date back I think appealed to a lot of companies. In fact, if I had to suggest the most common comment that came back, it was actually the timing above all else: both the timing for when these disclosures would be required on an annual basis, as well as the timing that the SEC would give companies to put them all in place. A lot of companies asked for more time.

Catherine Tsai: Hmm. That's interesting, because one of the letters that stuck out to me was from the Etsy CFO, because Etsy has been integrating ESG into their annual reports since their 2018 report, and it sounded like they would be in support of including some material climate information into their annual report, but with some limits or some caveats to that. So that was just one example of a company that might be OK with including ESG data into an annual report if there are some guardrails to it.

Steve Soter: Oh, yeah. And one of the things that's interesting about a company like Etsy, I would actually add Allbirds to that list as well, they've been doing this for a long time. They've been incorporating it in their 10-K. They've been getting some kind of assurance. And so you would think that those companies would raise their hand and say, you know what, "Hey, this is great, let's roll forward with it." But even then, and not to say that they had significantly a negative reaction to the SEC's proposal, but even in that case, there was still a little bit of caution to say, look, if we're going to do this, we need to do this in the right way. But to point out a company like Etsy, they've been doing this for a very long time. They're trailblazers with a handful of other companies as well.

Catherine Tsai: So, Steve, any other letters stick out to you?

Steve Soter: Well, the one that I actually thought was also interesting was actually from the Chamber of Commerce. And the Chamber of Commerce had one comment and one comment only, but they supported it with a ton of facts, and that was that we need more time to review this and to comment. One of the things that they actually mentioned is that the SEC apparently altered the text of the proposing release multiple times. So at first it was 510 pages long, then it became 490 pages long, then I guess it changed to another number of pages. I don't know who at the Chamber of Commerce is tracking the number of pages on the SEC's website. I thought that was interesting. They highlighted the fact that the SEC is asking questions or excuse me, is seeking responses to at least 771 questions. I thought that was interesting. One of the other things that I thought was interesting is that the SEC had previously asked for general feedback to 15 questions on potential climate-related disclosures. This was about a year ago. It was actually before Chair Gensler came on board at the SEC. Well, in that instance, the SEC asked for responses with way more time than what the SEC has asked for today or with this existing proposal to those 771 questions. So one of the things that the Chamber of Commerce highlighted is that, look, you only asked us 15 questions before, and you gave us a ton of time. Now you're asking almost 1,000 questions, and, you know, we're barely getting like more than a couple of months. Now, in fairness, the SEC ultimately granted everybody more time to comment. But it was interesting to me that the Chamber of Commerce had one comment and one comment only, and that was give us more time. And that was also another thing that was very consistent across those who dissented, including Commissioner Peirce, along with some other things that she dissented about, too. But again, we certainly saw a lot of companies asking for more time to digest what is a very significant proposed rulemaking.

Catherine Tsai: How does this work? Could the SEC reopen the comment period?

Steve Soter: Yeah, so it's a great question, and I get it all the time. What happens now? Well, several things could happen. The SEC could reopen the comment period. They could re-propose something to say, "Look, we heard your comments. What do you think about this version? What's your reaction to that?" The SEC could actually do nothing. I think that's unlikely. But the SEC has in the past proposed comments or, excuse me, proposed rules and asked for comments. And then nothing has really come of it, in some cases for several years. I suspect in this case, the SEC is going to release something. This seems to be a signature issue for Chair Gensler, but it's anybody's guess on when that's going to happen and what it is going to look like.

Catherine Tsai: There was also a letter from some former leaders of the SEC. Steve, tell us a little bit more about that one.

Steve Soter: This is one that I feel like our audience might find interesting. There's been a lot of debate and discussion about does the SEC even have authority to be asking for these disclosures? And what's notable is that there was a letter that was written by former SEC officials on both sides of the aisle who basically said, look, we're not writing to opine or provide comments on the proposal itself. What we are writing to or what we are commenting on is for the general public to know that even though we represent both sides of this kind of ESG argument, either for or against these kind of disclosures, we are unanimous in that the SEC has the authority to be asking for this information. The letter actually laid out several examples of when the SEC has done this in the past of how practitioners have responded. I actually thought it was really interesting because I actually share that opinion. Our audience should know I am not a former SEC official, but when that argument initially came up about, "Hey, could the SEC even ask for this?" The answer to that, at least in my view, is solidly yes. And this comment letter in particular argued for that point, which I think could provide some really interesting perspective, as you know, that that's going to be one of the points that's going to be argued about and probably litigated if the SEC actually proceeds to adopt this proposal.

Catherine Tsai: Yes, it's almost like they're anticipating that argument.

Steve Soter: Oh, I suspect that they are. And I think it is notable, again, that this is coming from those who are both for and against this climate proposal. But it's unanimous that they all agree. These are disclosures that the SEC is well within its authority to request.

Catherine Tsai: Well, that was our quick take on the news this week. Should we get to our closing question of the day?

Steve Soter: I would love it.

Catherine Tsai: All right. This one came from our producer, Mike, back in the booth, and he asks, what is the last letter that you wrote, Steve?

Steve Soter: You know what? It's interesting. I don't write many letters by hand, but as it turns out, we sent three of our five kids to a summer camp, which was somewhat grueling outdoor wilderness. I think they did like 30 miles over the course of three days. Our audience should know that this was not some kind of drug rehab kind of thing. But in anticipation of that being a difficult experience, we were asked to write letters to each of our kids, kind of to the effect of, "Hey, we know this sucks. You're doing a great job. We love you a ton, and you'll be better off for it. See you in a couple of days," kind of thing. So.

Catherine Tsai: Wow, handwritten notes?

Steve Soter: Handwritten notes. We couldn't have done electronically because there were, you know, no technology out there. So, handwritten notes in two pages.

Catherine Tsai: In cursive? Two pages? Wow.

Steve Soter: So, I don't write cursive. I barely write at all. But in my kind of chicken scratch, it actually ended up being each letter, two pages. So it's total of six pages that Steve had to write within the last month. Can you believe it? Barbaric.

Catherine Tsai: Good job. Do you still have a cramp in your hand or are you OK?

Steve Soter: You know what? It took a couple of days, but I finally got over it. How about you, Catherine? What's the most recent letter you wrote?

Catherine Tsai: Actually wasn't that long ago because my cousin Brianna writes my husband and me letters pretty often. And so we write her back, and it's handwritten notes. Yeah. So, yeah, just a couple of weeks ago.

Steve Soter: And I'm curious, what's the point of her writing you a handwritten note initially? Is there some significance to that?

Catherine Tsai: Oh, she has gotten really into writing letters, I think, to a bunch of people, and she has just kept up the tradition. So it's nice to get a little surprise in the mailbox. It doesn't happen that often, even a handwritten note anymore.

Steve Soter: Isn't that funny? As a kid, you would like rush to the mailbox and hope that you would get something. Anything. Now your email inbox fills up every single day and it's like, "Oh, my gosh, I wish people would stop writing to me."

Catherine Tsai: So true. But handwritten notes I'll take every day.

Steve Soter: I 100% agree. I am a big fan and I need to do it more myself.

Catherine Tsai: And that's been our news episode. Big thanks to you, dear listener, for surfing along with us. I'm Catherine Tsai. That was Steve Soter. And this has been Off the Books presented by Workiva.

Steve Soter: Yes, it has. Please subscribe. Leave a review. Tell your buddies if you like the show and feel free to drop us a line at, including any ideas you might have about future news episodes. Surf's up, and we'll see you on the next wave.


Season 3, Episode 20 Off the Presses | News: What Y'All Said on the SEC Climate Disclosure Proposal


22 minutes


Steve Soter, Catherine Tsai

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