The American Bankers Association has called for fundamental changes to proposed climate disclosure rules for federal contractors, claiming the plans will create unnecessary burdens on business and confuse investors.
The ABA was responding to consultation on the Federal Acquisition Regulation (FAR) on the disclosure of climate-related financial risk. The rule, proposed by the Department of Defense, the General Services Administration and NASA, requires businesses contracted by the Federal Government and agencies to disclose financed GHG emissions and set targets for their reduction.
In a letter to the three organizations, the ABA warned that regulated banks could be drawn under the rule which could in turn require disclosures from other organizations in their value chains. The letter said such effects could place ‘burdensome and onerous requirements on businesses far beyond what is intended by the agencies.’
The ABA also questioned the role of non-governmental organizations (NGOs) in overseeing the regulations and how disclosures under FAR would be integrated with separate disclosure rules planned by the Securities and Exchange Commission (SEC). It warned multiple rules ‘will confuse investors that will be receiving information from publicly held companies... as well government contracting managers.’
The letter focused in detail on the role of Scope 3 financed emissions, which for banks represent emission generated by investee companies, mainly borrowers.
“Scope 3 financed emissions are often misleading indicators of climate-related financial transition risk. In many cases, especially when related to financed emissions within a company’s investment portfolio, Scope 3 GHGs are merely indicative of the size of the organization or its respective borrowers,” the ABA said.
It also argued that Scope 3 emissions were ‘often subject to widely acknowledged challenges of double- and triple-counting within an investment portfolio or across multiple investment portfolios’ and called for Scope 3 financed emissions to be ‘eliminated’ from the regulation.
The letter comes just one week after a separate intervention by the ABA on climate related issues.
On February 6, the ABA wrote to the Federal Reserve calling for "flexible and principals-based regulation for banks over climate change, rather than imposing prescriptive rules."
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