The SEC’s upcoming mandatory climate disclosure rules, expected to be released in 2023 despite some initial delays, will require all public companies in the US to disclose specific climate-related metrics in their financial filings. This includes the impacts of identified physical and transition risks on financial statements, such as revenue, reserves, insurance, interests, impairment charges, operation costs and cash flows. These risks must then be aggregated to an absolute value of the positive and negative financial impacts on a line-by-line basis.
As companies strive to understand and comply with these new regulations, it is important to understand the potential implications and how to effectively mitigate the identified risks. One of the key ways to do this is through the use of advanced Energy Information Systems (EIS) and Fault Detection & Diagnostics (FDD), together known as Energy Management Information Systems (EMIS).
Energy Management Information Systems, such as those offered by CopperTree Analytics, can provide companies with a comprehensive view of their energy usage and costs. This can include information on energy consumption by portfolio, building, or even at the equipment level. By having a clear and detailed understanding of their energy usage, companies can better identify areas for improvement.
Fault Detection & Diagnostics can also play a crucial role in identifying and addressing potential issues related to energy usage and costs. FDD technology is designed to detect and diagnose equipment and system problems, often before they lead to a complete failure, or large amounts of excessive energy consumption. Enabling organizations to proactively address energy issues and prevent costly downtime or repairs not only reduces costs, but also helps organizations to be more resilient to potential disruptions.
Additionally, data from energy marketplaces and trading platforms can provide valuable insights into energy prices and trends, which can help companies to make more informed decisions about energy procurement or guide them in their efforts to reduce energy demand where demand-based or time-based billing is present. Another important data source for climate risk disclosure is information on a company’s carbon footprint. This needs to include data on greenhouse gas emissions, which can be calculated by EMIS using energy usage and the carbon emissions factors of the utilities supplying the facilities in question.
To ensure compliance with the new SEC regulations, companies will need to develop a comprehensive strategy for climate risk disclosure. According to the analysis conducted and presented by the Harvard Law School Forum on Corporate Governance, “The proposed rules do not mandate a specific methodology for gathering data and calculating GHG emissions. While the proposed rules do identify several factors to guide registrants in the preparation of their GHG emissions disclosures, a registrant nonetheless has significant latitude during several stages of the process.” This means that organizations will need to develop their own plans and methodologies amidst many options available to them.
CopperTree Analytics can help companies to develop and implement such a strategy by providing expert guidance, data analytics, and visualization tools, automating vast numbers of processes otherwise needing manual intervention. Our team of experts can also help companies to understand and interpret the data, as well as identify areas for improvement and potential opportunities.
In conclusion, the new SEC regulations for climate disclosure require companies to have a detailed understanding of their climate risks and opportunities. Energy information systems and FDD technology can play a critical role in this process by providing real-time data on energy usage and costs, as well as identifying potential issues. By integrating this data with other external data sources, companies can gain a more holistic view of their climate risks and opportunities and make better-informed decisions. CopperTree Analytics can help companies to develop and implement a comprehensive strategy for climate risk disclosure and ensure compliance with the new SEC regulations.
Written By:
Keith La Rose
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