provider Calcbench as data source); Bloomberg Lists BSE XBRL Data,
XBRL.org (2018), available at https://www.xbrl.org/news/bloomberg-lists-bse-xbrl-data/; R. Hoitash, and U. Hoitash, Measuring
Accounting Reporting Complexity with XBRL, 93 Account. Rev. 259-287
(2018). See 2019 Pension Review First Take: Flat to Down, Goldman
Sachs Asset Management (2020) (an example of asset manager use of
XBRL data), available at https://www.gsam.com/content/dam/gsam/pdfs/common/en/public/articles/2020/2019_Pension_First_Take.pdf?sa=n&rd=n
(citing XBRL research software provider Idaciti as a data source).
    \908\ See, e.g., A.J. Felo, J.W. Kim, and J. Lim, Can XBRL
Detailed Tagging of Footnotes Improve Financial Analysts'
Information Environment?, 28 Int'l J. Account. Info. Sys. 45 (2018);
Y. Huang, Y.G. Shan, and J.W. Yang., Information Processing Costs
and Stock Price Informativeness: Evidence from the XBRL Mandate, 46
Aust. J. Mgmt., 110-131 (2020) (finding ``a significant increase of
analyst forecast accuracy post-XBRL''); M. Kirk, J. Vincent, and D.
Williams, From Print to Practice: XBRL Extension Use and Analyst
Forecast Properties (Working Paper 2016) (finding ``the general
trend in forecast accuracy post-XBRL adoption is positive''); C.
Liu, T. Wang, and L.J. Yao, XBRL's Impact on Analyst Forecast
Behavior: An Empirical Study, 33 J. Account. Pub. Pol. 69-82 (2014)
(finding ``mandatory XBRL adoption has led to a significant
improvement in both the quantity and quality of information, as
measured by analyst following and forecast accuracy''). But see S.L.
Lambert, K. Krieger, and N. Mauck, Analysts' Forecasts Timeliness
and Accuracy Post-XBRL, 27 Int'l. J. Account. Info. Mgmt. 151-188
(2019) (finding significant increases in frequency and speed of
analyst forecast announcements, but no significant increase in
analyst forecast accuracy post-XBRL).
    \909\ See, e.g., A. Lawrence, J. Ryans, and E. Sun, Investor
Demand for Sell-Side Research, 92 Account. Rev. 123-149 (2017)
(finding the ``average retail investor appears to rely on analysts
to interpret financial reporting information rather than read the
actual filing''); D. Bradley, J. Clarke, S. Lee, and C. Ornthanalai,
Are Analysts' Recommendations Informative? Intraday Evidence on the
Impact of Time Stamp Delays, 69 J. Finance 645-673 (2014)
(concluding ``analyst recommendation revisions are the most
important and influential information disclosure channel
examined'').
---------------------------------------------------------------------------

2. Costs
    Below we discuss the anticipated direct and indirect costs of the
proposed rules. Direct costs would include compliance burdens for
registrants in their efforts to meet the new disclosure requirements.
These direct costs could potentially be significant; however, the
incremental costs would be lower to the extent that registrants already
provide the required disclosures. Indirect costs may include heightened
litigation risk and the potential disclosure of proprietary
information.\910\ We proceed by discussing these various costs.
---------------------------------------------------------------------------

    \910\ For example, these costs may include the revelation of
trade secrets, the disclosure of profitable customers and markets,
or the exposure of operating weakness to competing firms, unions,
regulators, investors, customers or suppliers. These costs are
commonly referred to as ``proprietary costs.''
---------------------------------------------------------------------------

a. Direct Costs
    The primary direct costs that the proposed rules would impose on
registrants are compliance costs. To the extent that they are not
already gathering the information required to be disclosed under the
proposed rules, registrants may need to re-allocate in-house personnel,
hire additional staff, and/or secure third-party consultancy services.
Registrants may also need to conduct climate-related risk assessments,
collect information or data, measure emissions (or, with respect to
Scope 3 emissions, gather data from relevant upstream and downstream
entities), integrate new software or reporting systems, seek legal
counsel, and obtain assurance on applicable disclosures (i.e., Scopes 1
and 2 emissions). In addition, even if a registrant already gathers and
reports the required information, some or all of this information may
be in locations outside of SEC filings (such as sustainability reports
posted on company websites or emissions data reported to the EPA).
These registrants may face lower incremental costs by virtue of already
having the necessary processes and systems in place to generate such
disclosures; however they may still incur some additional costs
associated with preparing this information for inclusion in SEC
filings.
(1) General Cost Estimates
    In this section, we review sources that provide insight into the
magnitude of the potential costs associated with the proposed rules.
With some exceptions discussed in further detail, these sources provide
information at the level of general costs for climate disclosures. We
acknowledge that these sources are limited in scope or
representativeness and thus may not directly reflect registrants'
compliance costs. For instance, some third-party sources may present
cost estimates that do not include all items required under the
proposed rules (e.g., assurance costs), or else they may aggregate the
costs of multiple items (including those not required under the
proposed rules) into a single cost figure. However, these sources may
serve as useful references to the extent that they overlap with
specific disclosure elements required in the proposed rules. For
example, third-party cost estimates of preparing TCFD reports or
completing the CDP questionnaire can offer a rough approximation of
potential compliance costs due to their similarity with the proposed
rules. Below, we request further data to assist us in estimating
potential costs.
    As discussed in Section V, for purposes of the Paperwork Reduction
Act of 1995 (``PRA''),\911\ we estimate the annual costs over the first
six years of compliance with the proposed rules.\912\ For non-SRC
registrants, the costs in the first year of compliance are estimated to
be $640,000 ($180,000 for internal costs and $460,000 for outside
professional costs), while annual costs in subsequent years are
estimated to be $530,000 ($150,000 for internal costs and $380,000 for
outside professional costs). For SRC registrants, the costs in the
first year of compliance are estimated to be $490,000 ($140,000 for
internal costs and $350,000 for outside professional costs), while
annual costs in subsequent years are estimated to be $420,000 ($120,000
for internal costs and $300,000 for outside professional costs). These
costs are expected to decrease over time for various reasons, including
increased institutional knowledge,

operational efficiency, and competition within the market for relevant
services.
---------------------------------------------------------------------------

    \911\ See Paperwork Reduction Act, Public Law 104-13, 109 Stat
163 (1995) (codified at 44 U.S.C. 3501 et seq.). See infra Section
V.
    \912\ The following estimates are applicable to registrants
filing form 10-K that have no existing climate-related disclosure
processes or expertise. All estimates are rounded to the nearest
$5,000.
---------------------------------------------------------------------------

    One commenter provided cost estimates for their services in
assisting client companies prepare TCFD-aligned disclosures.\913\ For
companies that have no prior experience in GHG analysis or climate-
related disclosures, the commenter estimates initial costs to range
from $150,000 to $200,000 to prepare TCFD-aligned disclosures.\914\
Companies that have already calculated their carbon footprints and only
need assistance with TCFD reporting may expect costs of $50,000 to
$200,000, with the average cost of approximately $100,000. Ongoing
costs for their services are expected to be zero conditional upon the
TCFD requirements remaining unchanged,\915\ however the reporting
company may still incur internal costs in preparing these disclosures
on an annual basis.
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    \913\ See memorandum, dated Feb. 4, 2022, concerning staff
meeting with representatives of S&P Global.
    \914\ This cost range pertains to clients' use of the
commenter's ``TCFD Suite'', which consists of the following modules:
Benchmarking/gap assessment, management interviews, physical risk
assessment, and various transition risk assessments, including
policy risk analysis, market risk assessment, technology risk
assessment, and reputation risk assessment. This cost range excludes
the cost of additional services, such as target-setting ($20,000 to
$30,000) and calculating GHG footprints ($75,000 to $125,000 for
Scopes 1, 2, and 3), the latter of which is discussed in further
detail in the following subsection.
    \915\ The commenter reports that should the TCFD requirements
change based on new science, projections, and business changes,
costs of the TCFD Suite in future years may range from $125,000 to
$175,000.
---------------------------------------------------------------------------

    Another source presents survey results of climate-related
disclosure costs for three unnamed companies, which consist of a
European-based multinational large-cap financial institution, a US-
based large-cap industrial manufacturing company, and a US-based mid-
cap waste management company.\916\ The survey reports that each firm
has ``already established robust in-house climate disclosure systems
that can easily be leveraged to comply with any new disclosure rule,''
as evidenced by their concurrent reporting under multiple climate
disclosure frameworks (e.g., TCFD, CDP, SASB, GRI, etc.). The
respondents indicate that anticipated incremental costs of a mandatory
climate disclosure rule are therefore expected to be minimal.\917\ All
respondents disclose Scopes 1, 2, and 3 emissions, while none of them
obtain third-party assurance for their climate-related disclosures.
---------------------------------------------------------------------------

    \916\ See L. Reiners and K. Torrent, The Cost of Climate
Disclosure: Three Case Studies on the Cost of Voluntary Climate-
Related Disclosure, Climate Risk Disclosure Lab (2021), available at
https://climatedisclosurelab.duke.edu/wp-content/uploads/2021/12/The-Cost-of-Climate-Disclosure.pdf.
    \917\ Incremental costs would be minimal to the extent that the
mandatory disclosure rule overlaps with their current reporting
practices. The respondents acknowledge that actual incremental costs
would depend on the contents of the final rule.
---------------------------------------------------------------------------

    The mid-cap waste management company estimates that the cost of
producing their first TCFD report was less than $10,000. The company's
reported annual costs consist of employee costs ($12,600) \918\ and
third-party costs ($60,000 to $160,000).\919\ However, the reported
annual costs may be less applicable to potential compliance costs as
they combine additional costs associated with several other activities
not necessarily required in the proposed rules, including its adherence
to multiple climate disclosure frameworks (e.g., TCFD, GRI, SASB, and
CDP) and designing its annual sustainability report and associated web
page.\920\ Overall, the company reports that its total costs related to
producing climate-related disclosures across these multiple frameworks
are less than 5% of its total SEC compliance-related costs.
---------------------------------------------------------------------------

    \918\ The company allocates three employees to produce climate-
related disclosures. Two employees in Legal and Compliance devote a
combined 80 hours per year on this task, while one employee in
Management and Administration devotes two hours per year.
    \919\ The company reports that approximately one-third of these
third-party costs is associated with designing the annual
sustainability report and associated web page, while the remaining
two-thirds is associated with report writing and consulting work on
the voluntary frameworks.
    \920\ These annual costs reflect a larger scope of climate-
related disclosures (e.g., multiple frameworks, sustainability
report, etc.) relative to the initial cost, which is specific to
TCFD reporting only. Nevertheless, because these estimates aggregate
the costs of reporting under the TCFD in addition to other climate
disclosure framework, these estimates can serve as an upper bound of
what annual costs may be specific to TCFD reporting only.
---------------------------------------------------------------------------

    The large-cap industrial manufacturing company reports that the
costs of preparing its first CDP questionnaire was no more than
$50,000. Additionally, the combined costs of producing its first TCFD,
SASB, and GRI disclosures were between $200,000 and $350,000. Reported
annual costs include internal costs (between $200,000 and $350,000)
\921\ and the cost for auditors and consultants ($400,000).\922\ These
cost estimates, however, may overestimate potential compliance costs to
the extent that they include disclosure items or activities not
required in the proposed rules. The company reports that their annual
costs of producing its voluntary climate-related disclosures are less
than 0.1% of their revenues.
---------------------------------------------------------------------------

    \921\ Internal costs include the cost of approximately 20
employees working part-time on climate-related disclosures from Nov.
until Mar. and one full-time consultant.
    \922\ Auditors review data quality and data collection
procedures, while consultants help prepare substantive disclosures,
advise on adherence to the voluntary climate disclosure frameworks,
and prepare web updates.
---------------------------------------------------------------------------

    The multinational financial institution reports that the cost of
producing its first TCFD report, SASB report, and CDP questionnaire
were each less than $100,000 given that such information overlaps with
what the company already discloses under the EU's Prospectus Regulation
(Regulation (EU) 2017/1129). The company estimates annual costs ranging
from $250,000 and $500,000 to produce these disclosures, but as before,
this range may combine the costs of activities that are not required in
the proposed rules.\923\ Similar to the industrial manufacturing
company, this company also notes that the annual costs of producing its
voluntary climate-related disclosures are less than 0.1% of their
revenues.
---------------------------------------------------------------------------

    \923\ The company notes that the bulk of its annual costs comes
from producing chapter 7 of its Universal Registration Document,
issued under the EU's Prospectus Regulation (Regulation (EU) 2017/
1129). Chapter 7 pertains to the extra-financial performance
statement of the consolidated firm.
---------------------------------------------------------------------------

    Some commenters also provided estimates of climate-related
disclosure costs for individual firms. One commenter provided a
breakdown of such costs for seven unnamed large cap firms across six
different industries.\924\ Headcount requirements ranged from two to 20
full-time equivalent employees. One large-cap firm in the energy
industry reported that its TCFD reporting process involved 40 employees
and six months of nearly full-time participation by 20 core team
members. Employee hours spent on climate reporting ranged from 7,500 to
10,000 annually. Fees for external advisory services ranged from
$50,000 to $1.35 million annually, which generally included legal
counsel and consulting services related to environmental engineering,
emissions, climate science, modeling, or sustainability reporting.
Another commenter, a Fortune 500 energy infrastructure firm, reported
that it employs a full-time, management level director that spends
about 25% of his time developing sustainability reports and other ESG
initiatives. This commenter also reported that it pays a third-party
consulting firm more than

$250,000 annually to assist in its ESG and sustainability report
process.\925\
---------------------------------------------------------------------------

    \924\ See Letter from Society for Corporate Governance (June 11,
2021).
    \925\ See Letter from Williams Companies, Inc. (June 12, 2021).
---------------------------------------------------------------------------

    The UK's Department for Business, Energy & Industrial Strategy, as
part of its Green Finance Strategy, has released a final stage impact
assessment (the ``UK impact assessment'') of their proposed rules that
would also require certain TCFD-aligned disclosures from firms and
asset managers listed on UK financial markets.\926\ The UK impact
assessment provides a breakdown of estimated average compliance costs
per affected entity. Under the assumption that affected entities have
no pre-existing climate-related disclosure practices or expertise, the
UK impact assessment estimates that first-year one-time costs would
include familiarization costs ($17,300 \927\ plus $2,600 per
subsidiary, as applicable) and legal review ($4,400). They also
estimate recurring annual governance disclosure costs ($12,500),
strategy disclosure costs ($17,900 \928\), risk management disclosure
costs ($14,900), metrics and targets disclosure costs ($104,400 in the
first year and $80,500 in subsequent years \929\), internal audit costs
($30,300), and signposting costs ($100).\930\ For companies with
subsidiaries, the costs of collecting information from subsidiaries and
processing this information are expected to be $4,300 for the parent
company and $1,700 for each subsidiary. In total, the study estimates
that a company with no pre-existing climate-related disclosure
practices or expertise could incur costs of $201,800 in the first year
and $177,900 in subsequent years, plus additional costs due to
subsidiaries, as applicable. This cost estimation methodology is
conditional upon assumptions regarding the number of required staff,
the rank or title of the staff, and the required labor hours, which are
then matched with local wage data to estimate final costs.
---------------------------------------------------------------------------

    \926\ See U.K. Dep't for Bus., Energy, & Indus. Strategy,
Mandating Climate-Related Financial Disclosures by Publicly Quoted
Companies, Large Private Companies and Limited Liability
Partnerships (LLPs), Final Stage Impact Assessment (Oct. 1, 2021),
available at https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1029317/climate-related-financial-disclosure-consultation-final-stage-impact-assessment.pdf
(The UK's climate-related disclosure rules would apply to Relevant
Public Interest Entities (PIEs), including Premium and Standard
Listed Companies with over 500 employees, UK registered companies
with securities admitted to AiM with more than 500 employees,
Limited Liability Partnership (LLPs) within the threshold of the
``500 test,'' and UK registered companies which are not included in
the categories above and are within the threshold of the ``500
test.'').
    \927\ In the final stage impact assessment, the cost estimate
provided for familiarization costs assumes that scenario analysis is
required. Because the proposed rules do not require scenario
analysis, this number references familiarization costs provided in
the initial impact assessment, which assumes no scenario analysis.
See U.K. Dep't for Bus., Energy, & Indus. Strategy, Mandating
Climate-Related Financial Disclosures by Publicly Quoted Companies,
Large Private Companies and Limited Liability Partnerships (LLPs),
Consultation Impact Assessment (Jan. 29, 2021), available at https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/972423/impact-assessment.pdf.
    \928\ This number excludes the cost of scenario analysis since
this is not required under the proposed rules.
    \929\ We note that these numbers do not include the costs of
measuring and reporting Scope 3 emissions since this is not required
under the UK proposed rules.
    \930\ These numbers have been converted from GBP based on the
2021 average exchange rate of $1.3757 USD/GBP, rounded to the
nearest $100. We note that the impact assessment also provides
estimates of incremental costs associated with each subsidiary;
however, these costs are not included in the estimates cited above
for the sake of brevity. Signposting costs refer to the ``additional
annual cost to those in scope to upload the required reporting
documentation and signposting to this documentation within their
annual report.''
---------------------------------------------------------------------------

    It is important to note that all of these cost estimates are
conditional on specific assumptions and can vary significantly
depending on firm characteristics, such as firm size, industry,
business model, the complexity of the firm's corporate structure,
starting level of internal expertise, etc. In addition, we note that,
in certain cases, these cost estimates may represent a registrant's
optimal response to investor demand, and thus may exceed the minimum
cost necessary to fulfill mandatory reporting of climate-related risks.
We are accordingly requesting comments regarding compliance costs,
including cost data that can be used to generate more accurate,
granular, and reliable cost estimates that are more representative of
the full set of affected registrants.
(2) Cost Estimates Specific to Emissions
    In this section, we review the available evidence, which provides
some insight into the scope of the compliance costs associated with
reporting GHG emissions. We are cognizant of the type of costs that
registrants will incur to report GHG emissions, e.g. resources,
systems, design and implementation of DCP, external consulting
services. In light of the limited information available, however, we
are unable to fully and accurately quantify these costs. Accordingly,
we are requesting comments regarding cost data for GHG emissions
reporting.
    One commenter reports that their services in calculating client
companies' GHG footprints (Scopes 1, 2, and 3 emissions) would
initially cost $75,000 to $125,000 if the client company has no prior
experience in this area.\931\ Ongoing costs amount to approximately
$40,000 assuming no material changes in Scope 3 emissions (i.e., assess
Scopes 1 and 2 only). If there are material changes to Scope 3
emissions, ongoing costs would range from $75,000 to $125,000 (i.e.,
assess Scopes 1, 2, and 3).
---------------------------------------------------------------------------

    \931\ See supra note 783. Legal and audit fees are not included
in these cost estimates.
---------------------------------------------------------------------------

    Another commenter, a climate management and accounting platform,
provided cost estimates of the measurement and reporting of emissions.
This commenter's estimates are disaggregated across scopes of emissions
as well as ``low maturity'' vs ``high maturity'' companies with respect
to emissions reporting. Low maturity companies are defined as those
that have no formal understanding of GHG emission calculations and have
no related policies or programs in place. Accordingly, these companies
have not organized or collected any data for such a calculation. High
maturity companies are defined as those that have the aforementioned
understanding, policies, programs, and data. Therefore, high maturity
companies are expected to face lower incremental costs. The commenter
estimates that the average first-year startup cost of assessing Scopes
1 and 2 emissions amount to $45,000 and $25,000 for companies of low
and high maturity, respectively. Including the assessment of Scope 3
emissions would increase the costs by $80,000 and $25,000 for companies
of low and high maturity, respectively. The commenter indicated that it
expects these costs to decrease over time as software solutions
simplify the process and reduce the burden on companies.
    Additional cost estimates are provided by another commenter, which
is an organization that assists companies, communities, and other
organizations in accurately assessing emissions data across all scopes
of emissions.\932\ According to their pricing structure, initial one-
time costs amount to $10,000, which includes identifying data input
needs, developing the design and organization of user interfaces,
establishing software and IT systems, and reporting emissions from
prior years to the extent that historic data is available. Ongoing
costs, which includes a subscription fee and data management fee,
amount to $12,000 plus $1,200 per building that is covered

in the calculation of emissions. Another organization that offers
similar services, among others, indicates that their fees for GHG
accounting for Scopes 1, 2, and 3 can range from $11,800 to
$118,300.\933\ Their fees for applying the PCAF method on investment
and lending portfolios range from $11,800 to $35,500. They note that
the assessment process take approximately 1-3 months depending on the
complexity and availability of data.
---------------------------------------------------------------------------

    \932\ See memorandum, dated Jan. 21, 2022, concerning staff
meeting with representatives of Ledger8760, available at https://www.sec.gov/comments/s7-10-22/s71022.htm.
    \933\ See memorandum, dated Jan. 14, 2022, concerning staff
meeting with representatives of South Pole. These numbers have been
converted from EUR based on the 2021 average exchange rate of $1.183
USD/EUR, rounded to the nearest $100.
---------------------------------------------------------------------------

    The EPA has also sought to quantify the costs of measuring and
reporting emissions in accordance with the mandatory Greenhouse Gas
Reporting Program, which generally requires facility-level reporting of
emissions from large emitters and from large suppliers of certain
products (e.g., entities that produce gasoline that will eventually be
consumed downstream by the end-user).\934\ The EPA estimated that the
rule would impose small expected costs on the facilities under its
purview. The EPA estimated that, for most sectors, the costs represent
at most 0.1% of sales.\935\ For small entities,\936\ the EPA estimated
that the costs are on average less than 0.5% of sales. While the EPA's
emissions reporting requirements, as discussed above, may elicit some
of the information required under our proposed rules, given that the
requirements are different, the actual compliance costs would differ
accordingly.
---------------------------------------------------------------------------

    \934\ See Section IV.A.3 for more information on the EPA
mandatory Greenhouse Gas Reporting Program.
    \935\ See EPA, Regulatory Impact Analysis for the Mandatory
Reporting of Greenhouse Gas Emissions (Sept. 2009), available at
https://www.epa.gov/sites/default/files/2015-07/documents/regulatoryimpactanalysisghg.pdf. The EPA notes that several facility
types do not currently report emissions (or the existence of such
disclosure practices cannot be confirmed), therefore the cost
estimates for these facility types reflect full start-up costs to
meet the reporting requirements.
    \936\ The EPA defines a small entity as (1) a small business, as
defined by SBA's regulations at 13 CFR part 121.201; (2) a small
governmental jurisdiction that is a government of a city, county,
town, school district, or special district with a population of less
than 50,000; or (3) a small organization that is any not-for-profit
enterprise that is independently owned and operated and is not
dominant in its field.
---------------------------------------------------------------------------

    A survey conducted by PCAF provides some estimates of the costs of
assessing financed emissions.\937\ Financed emissions, which can be one
component of Scope 3 emissions for certain financial institutions, can
be described as the emissions generated by companies in which a
financial institution invests or to which it otherwise has exposure.
The PCAF survey of 18 unnamed financial institutions \938\ found that
typical staff time ranged between 50 and 100 days and the costs for
contracting external support was less than $20,000 for the majority of
respondents. These estimates may provide some sense of the costs that
may be incurred by those financial institutions that would be required
to report Scope 3 emissions under the proposed rules.
---------------------------------------------------------------------------

    \937\ See Letter from PCAF (Dec. 21, 2021).
    \938\ The 18 survey respondents consist of 2 insurance
companies, 13 banks (commercial, investment, or development), 1
asset owner, and 2 asset managers. Respondents' asset size ranges
from less than a $1bn USD to $500bn USD. The average assets covered
by this disclosure activity was approximately $5-20bn USD.
---------------------------------------------------------------------------

(3) Cost Estimates of Assurance for Scopes 1 and 2 Emissions
Disclosures
    Registrants that are accelerated filers and large accelerated
filers will incur additional costs in obtaining assurance of Scopes 1
and 2 emissions disclosures. The Commission estimates these costs
starting with data on these filers' median audit fees in fiscal year
2020, which is $989,566 and $2,781,962 for accelerated filers and large
accelerated filers, respectively.\939\ Next, an academic study suggests
that assurance costs for sustainability reports (which serve as a
common location for climate-related information, in addition to other
non-financial topics) may range from 5% to 10% of total audit
fees.\940\ We take the minimum, median, and maximum percentages (5%,
7.5%, and 10%, respectively) and apply further adjustments based on (i)
emissions disclosures typically compromising only a portion of CSR
reports, (ii) the potential fee premium related to attestation report
included in SEC filings, and (iii) the average pricing difference
between limited and reasonable assurance. For limited assurance, we
estimate that accelerated filers will incur costs ranging from $30,000
to $60,000 (with a median of $45,000), while large accelerated filers
will incur costs ranging from $75,000 to $145,000 (with a median of
$110,000). For reasonable assurance, we estimate that accelerated
filers will incur costs ranging from $50,000 to $100,000 (with a median
of $75,000), while large accelerated filers will incur costs ranging
from $115,000 to $235,000 (with a median of $175,000).
---------------------------------------------------------------------------

    \939\ Data on audit fees is from Audit Analytics, which provides
all fee data disclosed by SEC registrants in electronic filings
since Jan. 1, 2000.
    \940\ See R.J. Casey and J.H. Grenier, Understanding and
Contributing to the Enigma of Corporate Social Responsibility (CSR)
Assurance in the United States, 97 Auditing: A Journal of Practice &
Theory 130 (2015).
---------------------------------------------------------------------------

    On the one hand, these estimates may underestimate actual costs as
they are based on relative costs of assurance for financial statements,
and assurance on emissions may differ in important ways. On the other
hand, the costs may be lower in the future to the extent that the
market for assurance services matures with respect to institutional
knowledge, procedural efficiency, and overall competition. We request
additional data that may assist in accurately assessing the costs of
obtaining assurance over emissions disclosures.
(4) Factors That Affect Direct Costs
    Incremental compliance costs may be relatively lower for
registrants that already meet some of the disclosure and tagging
requirements. For instance, registrants that are currently subject to
the EPA's Greenhouse Gas Reporting Program would face lower incremental
costs in reporting certain scopes of emissions relative to a firm that
has no emissions measurement systems in place.\941\ Similarly,
registrants that already provide extensive qualitative disclosures on
climate-related risks, which tend to be large accelerated filers and
registrants in high emission industries,\942\ may face lower
incremental costs in meeting certain disclosure requirements. As
discussed in Section IV.A.5.a, the Commission's staff reviewed 6,644
recent annual reports (Forms 10-K, 40-F, and 20-F) and found that 33%
of them contained disclosures related to climate change, the majority
of which discussed information related to business impact, emissions,
international climate accords, and physical risks. Registrants with
operations in foreign jurisdictions \943\ where disclosure requirements
are based on the TCFD's framework for climate-related financial
reporting, would also face lower incremental costs.\944\ Moreover,
costs may also be mitigated by the proposed transition period, which
would allow firms to more gradually transition to the new reporting
regime.
---------------------------------------------------------------------------

    \941\ See Section IV.C.1.e for more information on how the
proposed rules compare to the EPA's emissions reporting
requirements.
    \942\ See Section IV.A.5.a.
    \943\ E.g., Morningstar reports that over 35% of S&P 500
revenues came from foreign markets, while this percentage is around
20% for the revenues coming from companies belonging to the Russell
2000 index. See, https://www.morningstar.com/articles/918437/your-us-equity-fund-is-more-global-than-you-think.
    \944\ See Section IV.A.4 for a discussion on International
Disclosure Requirements.
---------------------------------------------------------------------------

    Several industry reports also document how a sizeable portion of
U.S.

companies report climate-related information under one or more third-
party frameworks that are either fully or partially aligned with the
TCFD disclosure elements. For example, the CCMC survey (G&A study)
reports that among their sample of U.S. public companies, 44% (53%) use
the SASB, 31% (52%) use the GRI, 29% (30%) use the TCFD, and 24% (40%)
use the CDP. Moody's analytics provides a detailed view for a sample of
659 U.S. companies of the existing disclosure rate across the different
TCFD disclosure elements that range from a high of 45% disclosure rate
for Risks and Opportunities--Strategy (a), to a low of 5% for Risks and
Opportunities--Strategy (c) (see Table 4). Since the proposed rules are
broadly consistent with the TCFD framework, we would expect lower
incremental compliance costs for registrants that provide most or all
disclosures according to the TCFD or related frameworks, including the
CDP, which has fully integrated the TCFD disclosure elements into its
disclosure questionnaire, and other frameworks and/or standards partly
aligned with the TCFD recommendations.
    Similarly, registrants in the insurance industry may also face
lower incremental costs due to their existing disclosure practices. As
discussed in Section IV.A.3, a large subset of insurance firms are
required to disclose their climate-related risk assessment and strategy
via the NAIC Climate Risk Disclosure Survey. A comment by a state
insurance commissioner stated that because this survey overlaps
extensively with the TCFD recommendations, these firms should be able
to easily switch to reporting via the TCFD disclosure framework.\945\
This is because the proposed rules are broadly consistent with the
TCFD. We expect that registrants in the insurance industry may be able
to adapt more easily to providing disclosure under these rules.
---------------------------------------------------------------------------

    \945\ See Letter from Mike Kreidler, Office of the Insurance
Commissioner, State of Washington (June 14, 2021).
---------------------------------------------------------------------------

    Section IV.A.5.e reports survey evidence on the frequency with
which firms obtain assurance in sustainability reports. This evidence
suggests that a significant fraction of large companies already obtain
some form, albeit limited, of assurance. To the extent that large
accelerated filers and accelerated filers already voluntarily obtain
some form of assurance over their GHG emissions, these registrants
would face lower incremental costs associated with complying with the
proposed rules' assurance requirements. These registrants tend to bear
proportionately lower compliance costs than smaller issuers due to the
fixed cost components of such compliance.\946\ Additionally, as the
market for assurance matures, the Commission staff expects these costs
to decrease over time.
---------------------------------------------------------------------------

    \946\ For example, during fiscal year 2020, median audit fees as
percentage of revenue for large accelerated filers and accelerated
filers was 0.16%, while the corresponding figure for non-accelerated
filers was 1.1%.
---------------------------------------------------------------------------

    Incremental costs may be higher for smaller firms considering that
they are less likely to have climate-related disclosure systems and
processes already in place.\947\ If smaller firms were to face higher
proportional fixed costs in meeting the disclosure requirements, this
may potentially put them at a competitive disadvantage to larger
firms.\948\ Conversely, incremental costs for smaller firms may be
lower to the extent that they have less complexity with respect to
their assets and operations, which may allow them to assess climate-
risk exposures or measure emissions at lower cost.
---------------------------------------------------------------------------

    \947\ See supra note 760. See also discussion of the Commission
staff's review using climate-related keyword searches in Section
IV.A.5.a.
    \948\ Because higher proportional fixed costs for smaller firms
may be particularly acute with respect to assessing Scope 3
emissions, the proposed rules exempt SRCs from providing Scope 3
emissions disclosures. Since SRCs are a small fraction of the
market, the overall benefit to investors would not be as large as
for non-SRCs, while avoiding high fixed costs that could put them at
a potential competitive disadvantage.
---------------------------------------------------------------------------

    With respect to the Inline XBRL tagging requirements, various
preparation solutions have been developed and used by operating
companies to fulfill their structuring requirements, and some evidence
suggests that, for smaller companies, XBRL compliance costs have
decreased over time.\949\ The incremental compliance costs associated
with Inline XBRL tagging of climate-related disclosures would also be
mitigated by the fact that filers that would be subject to the proposed
requirements would also be subject to other Inline XBRL requirements
for other disclosures in Commission filings, including financial
statement and cover page disclosures in certain periodic reports and
registration statements.\950\ As such, the proposal would not impose
Inline XBRL compliance requirements on filers that would otherwise not
be subject to such requirements, and filers may be able to leverage
existing Inline XBRL preparation processes and/or expertise in
complying with the proposed climate-related disclosure tagging
requirements.
---------------------------------------------------------------------------

    \949\ An AICPA survey of 1,032 reporting companies with $75
million or less in market capitalization in 2018 found an average
cost of $5,850 per year, a median cost of $2,500 per year, and a
maximum cost of $51,500 per year for fully outsourced XBRL creation
and filing, representing a 45% decline in average cost and a 69%
decline in median cost since 2014. See M. Cohn, AICPA Sees 45% Drop
in XBRL Costs for Small Companies, Accounting Today (Aug. 15, 2018)
(stating that a 2018 NASDAQ survey of 151 listed registrants found
an average XBRL compliance cost of $20,000 per quarter, a median
XBRL compliance cost of $7,500 per quarter, and a maximum, XBRL
compliance cost of $350,000 per quarter in XBRL costs per quarter),
available at https://www.accountingtoday.com/news/aicpa-sees-45-drop-in-xbrl-costs-for-small-reporting-companies (retrieved from
Factiva database). See also Letter from Nasdaq, Inc., Mar. 21, 2019
to the Request for Comment on Earnings Releases and Quarterly
Reports; Release No. 33-10588 (Dec. 18, 2018) 83 FR 65601 (Dec. 21,
2018).
    \950\ See 17 CFR 229.601(b)(101); 17 CFR 232.405 (for
requirements related to tagging financial statements (including
footnotes and schedules) in Inline XBRL). See also 17 CFR
229.601(b)(104); 17 CFR 232.406 for requirements related to tagging
cover page disclosures in Inline XBRL. Beginning in 2024, filers of
most fee-bearing forms will also be required to structure filing fee
information in Inline XBRL, although the Commission will provide an
optional web tool that will allow filers to provide those tagged
disclosures without the use of Inline XBRL compliance services or
software. See 17 CFR 229.601(b)(108) and 17 CFR 232.408; Filing Fee
Disclosure and Payment Methods Modernization, Release No. 33-10997
(Oct. 13, 2021), 86 FR 70166 (Dec. 9, 2021).
---------------------------------------------------------------------------

    We expect that the number of registrants committed to preparing
climate-related disclosures will increase in the future, independently
from our proposed rules. As discussed in Section IV.B.1, a sizeable and
growing portion of global investors consider climate change as the
leading issue driving their engagements with companies and is demanding
robust disclosure around its impacts and the plan to mitigate climate-
related risks. Consistent with this increasing demand for climate-
related information, recent trends showed an uptick in climate-related
disclosures, particularly within samples of larger firms, though not
necessarily through their regulatory filings.\951\ Furthermore, the
market for related services (e.g., GHG accounting services, auditors,
and other consultants, etc.) may become more competitive, driving down
costs. To the extent that these trends continue in the future, we would
expect that the incremental costs for complying with the proposed rules
would become lower for an increasing number of firms.
---------------------------------------------------------------------------

    \951\ See Section IV.A.5.
---------------------------------------------------------------------------

b. Indirect Costs
    In addition to the direct costs of preparing climate-related
disclosures, the proposed rules could also lead to indirect costs. For
example, the proposed rules may result in additional litigation risk
since the proposed climate-related disclosures may be new

and unfamiliar to many registrants.\952\ The proposed rules would
significantly expand the type and amount of information registrants are
required to provide about climate-related risks. Registrants unfamiliar
preparing these disclosures may face significant uncertainty and novel
compliance challenges. To the extent this leads to inadvertent non-
compliance, registrants may face additional exposure to litigation or
enforcement action.
---------------------------------------------------------------------------

    \952\ See supra note 841.
---------------------------------------------------------------------------

    However, certain factors may mitigate this concern. First, existing
and proposed safe harbors \953\ would provide protection from liability
for certain statements by registrants, including projections regarding
future impacts of climate-related risks on a registrant's consolidated
financial statements and climate-related targets and goals. Second, the
proposed rules would include phase-in periods after the effective date
to provide registrants with sufficient time to become familiar with and
meet the proposed disclosure requirements.\954\
---------------------------------------------------------------------------

    \953\ As previously noted, registrants would be able to use the
existing safe harbors for forward-looking statements that were added
to the Securities Act and Exchange Act pursuant to the PSLRA
assuming all conditions of those safe harbor provisions are met. See
supra note 219.
    \954\ Compliance would be required in a registrant's fiscal year
ending no earlier than two years after the effective date of any
adopted rules. An additional one year phase-in would be provided for
registrants that are not large accelerated filers, while complying
with Scope 3 emissions reporting would also be provided with an
additional one year phase-in.
---------------------------------------------------------------------------

    Another potential indirect cost is the possibility that certain
provisions of the proposed rules may force registrants to disclose
proprietary information.\955\ Under the proposed rules, registrants
would be required to disclose a wide range of climate-related
information, including potential impacts on its business operations or
production processes, types and locations of its operations, products
or services, supply chain and/or value chain. Registrants would be
further required to disclose whether they have emissions-related
targets and metrics or an internal carbon price, and if they do, what
they are. To the extent that a registrant's business model or strategy
relies on the confidentiality of such information, the required
disclosures may put the registrant at a competitive disadvantage.
---------------------------------------------------------------------------

    \955\ Proprietary costs are generally relevant for reporting
that involves information about a firms' business operations or
production processes and disclosures that are specific, detailed and
process-oriented. See, e.g., C. Leuz, A. Triantis, and T.Y. Wang,
Why Do Firms Go Dark? Causes and Economic Consequences of Voluntary
SEC Deregistrations, 45(2) Journal of Accounting and Economics 181-
208 (2008); D.A. Bens, P. G. Berger, and S.J. Monahan, Discretionary
Disclosure in Financial Reporting: An Examination Comparing Internal
Firm Data to Externally Reported Segment Data, 86 (2) The Accounting
Review 417-449 (2011).
---------------------------------------------------------------------------

c. Other Cost Considerations
    Although the proposed rules may impose significant compliance
costs, we expect these costs to decrease over time, both from firm-
specific and market-wide contexts. From the firm-specific context,
registrant disclosing climate-related information for the first time is
likely to incur initial fixed costs to develop and implement the
necessary processes and controls.\956\ Once the firm invests in the
institutional knowledge and systems to prepare the disclosures, the
procedural efficiency of these processes and controls should
subsequently improve, leading to lower costs in following years.\957\
---------------------------------------------------------------------------

    \956\ See Letter from Financial Executives International's (FEI)
Committee on Corporate Reporting (CCR) (June 10, 2021).
    \957\ The assumption that first year's costs are greater than
subsequent years' is consistent with the cost estimation models of
the EPA's Greenhouse Gas Reporting Program and the UK's proposal of
mandatory TCFD-aligned disclosure.
---------------------------------------------------------------------------

    Establishing a framework for standardized climate-related
disclosures could also reduce uncertainty for registrants over the
specific content to disclose and could mitigate disclosure burdens to
the extent that it reduces information requests from third parties.
Before registrants can take any tangible steps toward preparing
climate-related disclosures, they must first determine which specific
climate-related discussions, metrics, and analyses are most appropriate
to disclose--a process that, under the current regime, can involve
significant uncertainty. Furthermore, the uncertain, complex, and
multidimensional nature unique to climate-related risks, combined with
the unpredictability of investor responses to such disclosures,\958\
can also make it costly for management to determine the risks which
meet the materiality threshold.
---------------------------------------------------------------------------

    \958\ See Section IV.B.2.a.(4).
---------------------------------------------------------------------------

    By implementing a standardized climate disclosure framework, the
proposed rules could potentially reduce the burden that registrants may
face in the environment of diverging voluntary frameworks and help
clarify for registrants what they should disclose, where and when to
make their disclosures, and what structure or methodology to use.\959\
While a more principles-based approach would provide additional
flexibility for registrants, it also may impose certain costs if they
are unsure of what climate-related measures are needed to satisfy legal
requirements. Such an approach could entail additional judgment on the
part of management, or result in registrants erring on the side of
caution in complex matters such as climate-related disclosures. This
could ultimately translate into spending more resources to determine
appropriate compliance with the Commission's applicable reporting
standards. The proposed rules should provide legal certainty around
climate-related disclosure and therefore mitigate the compliance
burdens associated with the existing regulatory framework.
---------------------------------------------------------------------------

    \959\ See supra note 806.
---------------------------------------------------------------------------

    Furthermore, some registrants currently receive multiple, diverse
requests for climate-related information from different parties, such
as investors, asset managers, and data service providers. Responding to
such third-party request can be costly and inefficient \960\ and may
put significant and sometimes competing demands on registrants.\961\ A
standardized climate disclosure framework could potentially reduce
information requests from third parties to the extent that such
requests overlap with the disclosures required under the proposed
rules. We acknowledge, however, that registrants that currently use
third-party frameworks to disclose climate-related information may
incur certain costs of switching from their existing practice to our
proposed disclosure framework.
---------------------------------------------------------------------------

    \960\ Id.
    \961\ TCFD, Status Report: Task Force on Climate-related
Financial Disclosures, (June 2019), available at https://www.fsb-tcfd.org/wp-content/uploads/2019/06/2019-TCFD-Status-Report-FINAL-053119.pdf.
---------------------------------------------------------------------------

    From a market-wide context, mandated climate disclosures may
heighten demand for certain data or third-party services related to
preparing the required disclosures, including assistance with the
reporting of emissions data. In the short term, there could be a
potential increase in the prices of such services to extent that the
initial growth in demand exceeds the supply. In the long term, however,
this heightened demand is expected to spur competition, innovation, and
other economies of scale that could over time lower associated costs
for such services and data and improve their availability. Moreover,
the aggregate accumulation of institutional knowledge may lead to a
broad convergence of disclosure-related best practices, which could
further reduce the costs of the proposed disclosures.
    Overall, the market effects deriving from competition and
innovation could enhance the efficiency and availability of relevant
data and services, thereby

lowering costs. These positive externalities from standard reporting
practices can provide additional market-wide cost savings to the extent
that they reduce duplicative effort in the production and acquisition
of information.\962\
---------------------------------------------------------------------------

    \962\ See supra note 841.
---------------------------------------------------------------------------

D. Anticipated Effects on Efficiency, Competition, and Capital
Formation

1. Efficiency
    As discussed in Section IV.B.2, the complexity, uncertainty, and
long-term nature of climate risks make it unlikely that voluntary
disclosure of such risks would be fully revealing. Therefore, as
detailed in Section IV.C.1, mandating that climate-related disclosures
be presented in a comparable and consistent manner and in a machine-
readable language (Inline XBRL) is likely to enhance the information
environment for investors. In doing so, the proposed rules are expected
to improve market efficiency and price discovery by enabling climate-
related information to be more fully incorporated into asset prices.
Improved efficiency could inform the flow of capital and allow climate-
related risks to be borne by those who are most willing and able to
bear them.\963\
---------------------------------------------------------------------------

    \963\ A recent study by McKinsey found that 85% of investors
either agreed or strongly agreed that ``more standardization of
sustainability reporting'' would help them allocate capital more
effectively, and 83% either agreed or strongly agreed that it would
help them manage risk more effectively. See Sara Bernow et al., More
Than Values: The Value-Based Sustainability Reporting That Investors
Want, McKinsey & Company (Aug. 7, 2019), available at https://
www.mckinsey.com/~/media/McKinsey/Business%20Functions/
Sustainability/Our%20Insights/
More%20than%20values%20The%20value%20based%20sustainability%20reporti
ng%20that%20investors%20want/More%20than%20values-VF.pdf.
---------------------------------------------------------------------------

    These expected improvements in market efficiency are broadly
consistent with empirical research. If climate-related information is
relevant for asset prices, and therefore market efficiency, then the
effective disclosure of climate-related information would be expected
to cause differential asset price/financing cost responses across firms
and settings. Empirical evidence is largely consistent with this
expectation. Academic studies have found evidence that among firms that
voluntarily report emissions via the CDP questionnaire, those with
higher emissions (relative to their size and industry peers) pay higher
loan spreads.\964\ A recent report from Lazard Ltd. also found a
significant relationship between carbon dioxide emissions and a
company's price-to-earnings ratio.\965\ Even in settings with mandatory
disclosure, evidence is consistent with abnormally positive stock
returns on announcement date for low-emitters and negative returns for
high-emitters.\966\
---------------------------------------------------------------------------

    \964\ See S. Kleimeier, and M. Viehs, Carbon Disclosure,
Emission Levels, and the Cost of Debt, Emission Levels, and the Cost
of Debt, SSRN (2018), available at https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2719665.
    \965\ See Lazard Climate Center (2021), available at https://www.lazard.com/media/451920/lazard-climate-center-presentation-december-2021.pdf. The report examined more than 16,000 companies
from 2016 through 2020 and found that investors are actively and
directly pricing some transition risk into valuations, however the
effects vary significantly across different types of GHGs, market
cap, and sectors. Large cap companies (>$50 billion) experience
greater valuation discounts, while big emitters, such as energy
companies, showed the starkest correlation. On average, a 10%
decrease in a large U.S. energy company's emissions corresponded
with a 3.9% increase in its price-to-earnings ratio.
    \966\ See supra note 850 (Jouvenout and Kruger, 2021).
---------------------------------------------------------------------------

    While the disclosure of climate-related information can improve
market efficiency, investor response to such disclosures can vary
depending on specific circumstances, thereby highlighting the
limitations of the aforementioned studies.\967\ For example, if
increased disclosure causes investors to realize that their portfolios
are more exposed to climate risk than previously known, valuations may
fall and costs of capital may increase as investors reallocate capital
to balance this risk. Further, aggregate pricing effects could also be
due to a better understanding of future regulatory risks firms
face.\968\ Studies find, however, that cumulative abnormal stock
returns around the announcement date are negatively correlated with
firms' mandatorily disclosed emission levels. This consistent with
mandatory reporting of climate-related information improving price
discovery and market efficiency.
---------------------------------------------------------------------------

    \967\ Id. See also J. Grewal, E.J. Riedl, and G. Serafeim,
Market Reaction to Mandatory Nonfinancial Disclosure, 65 (7)
Management Science 3061-3084 (2019); See supra note 850 (Bolton and
Kacperczyk, 2020). The first paper in particular finds a negative
aggregate stock market response to the passage of a mandatory ESG
disclosure rules in the EU. These results, however, should be
interpreted with caution. For one, the empirical design is based on
matching, but there are reasons to believe that the treatment and
control groups differ along important dimensions. Further, there is
no event study plot, and results are not shown for cumulative
abnormal returns after controlling for common risk factors like the
Fama-French 3-factor model. It is therefore difficult to discern
whether the passage of the disclosure rules is actually driving the
aggregate market response.
    \968\ For example, the passage of disclosure rules may signal
more stringent enforcement of emissions rules going forward, leading
to an increase in the risk of regulation. Therefore, it is difficult
to disentangle the pure effect of disclosure rules on stock
performance and the cost of capital.
---------------------------------------------------------------------------

    Empirical research has also documented evidence of market
inefficiencies with respect to climate-related risks. For example, one
study finds that stock prices of food companies (i.e. food processing
and agricultural companies) may exhibit mispricing with respect to
drought exposure.\969\ The study documents that drought-exposed firms
report reduced future profitability, indicating that drought exposure
is a financial risk. In an efficient market, this risk should result in
trading activity that decreases the current stock price and increases
the expected return (to compensate investors for bearing this risk).
The study, however, finds that drought-exposed firms deliver lower
future returns relative to firms with less exposure, suggesting that
the market initially under-reacts to drought exposure. In other words,
the market may fail to sufficiently incorporate the risk of drought
exposure into the current stock price, resulting in investors holding
mispriced assets and bearing risk for which they are not appropriately
compensated. Another study finds, through similar reasoning, that stock
prices may exhibit mispricing with respect to temperature changes
induced by climate change.\970\ According to survey evidence of global
institutional investors, respondents believe that equity valuations do
not fully reflect climate-related risks.\971\ Mandatory disclosures may
help address these inefficiencies as it would provide investors with
the information necessary to better incorporate climate-related risks
into asset prices.
---------------------------------------------------------------------------

    \969\ See H. Hong, F.W. Li, J. Xu. Climate Risks And Market
Efficiency, 208.1 Journal of Econometrics 265-28 (2019).
    \970\ See, e.g., K. Alok, W. Xin, C. Zhang, Climate Sensitivity
And Predictable Returns, available at https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3331872.
    \971\ See P. Krueger, Z. Sautner, L.T. Starks, The Importance of
Climate Risks for Institutional Investors, 33(3) The Review of
Financial Studies, 1067-1111 (2020).
---------------------------------------------------------------------------

    These capital market benefits can be further strengthened by the
requirement to tag the climate-related disclosures in Inline XBRL, as
XBRL requirements have been observed to reduce informational advantages
of informed traders, increase stock liquidity, and reduce cost of
capital.\972\ These benefits

may also have valuation implications. The discounted cash flow model
illustrates how, all else equal, a drop in the cost of capital leads to
a boost in equity valuation, which can further benefit investors.
---------------------------------------------------------------------------

    \972\ See, e.g., N. Bhattacharya, Y.J. Cho, J.B. Kim, Leveling
the Playing Field Between Large and Small Institutions: Evidence
from the SEC's XBRL Mandate, 93(5) The Accounting Review 51-71
(2018); B. Li, Z. Liu, W. Qiang, and B. Zhang, The Impact of XBRL
Adoption on Local Bias: Evidence from Mandated U.S. Filers, 39(6)
Journal of Accounting and Public Policy (2020); W. Sassi, H. Ben
Othman, and K. Hussainey, The Impact of Mandatory Adoption of XBRL
on Firm's Stock Liquidity: A Cross-Country Study, 19(2) Journal of
Financial Reporting and Accounting 299-324 (2021); C. Ra and H. Lee,
XBRL Adoption, Information Asymmetry, Cost of Capital, and Reporting
Lags, 10 IBusiness, 93-118 (2018); S.C. Lai, Y.S. Lin, Y.H. Lin, and
H.W. Huang, XBRL Adoption and Cost of Debt, International Journal of
Accounting & Information Management (2015); Y. Cong, J. Hao, and L.
Zou, The Impact of XBRL Reporting on Market Efficiency, 28(2)
Journal of Information Systems 181-207 (2014).
---------------------------------------------------------------------------

    There are also important efficiency implications in relation to
systemic risks.\973\ The increasing frequency and severity of climate
events can potentially lead to destabilizing losses for insurance
companies,\974\ banks,\975\ and other financial intermediaries with
direct and indirect exposures to different affected industries and
assets. Some commentators state that, in addition to physical risks,
the financial system could be destabilized also by potentially rapid
and unexpected losses to carbon-intensive assets caused by a disorderly
transition to a low-carbon economy or a shift in the market's
perception of climate risks.\976\ With insufficient and inconsistent
disclosures, asset prices may not fully reflect climate-related risks.
Consequently, market participants may inadvertently accumulate large
exposures to such risks, leaving them vulnerable to considerable
unexpected and potentially sudden losses.\977\
---------------------------------------------------------------------------

    \973\ Systemic risk refers to the risk of a breakdown of an
entire system, rather than simply the failure of individual parts.
In a financial context, systematic risk denotes the risk of a
cascading failure in the financial sector, caused by linkages within
the financial system, resulting in a severe economic downturn.
    \974\ See Facts + Statistics: Global Catastrophes, Insurance
Information Institute, available at https://www.iii.org/fact-statistic/facts-statistics-global-catastrophes.
    \975\ The Office of the Comptroller of the Currency (OCC)
recently requested feedback on draft principles designed to support
the identification and management of climate-related financial risks
at OCC-regulated institutions with more than $100 billion in total
consolidated assets. See Principles for Climate-Related Financial
Risk Management for Large Banks, Office of the Comptroller of the
Currency (2021), available at https://occ.gov/news-issuances/news-releases/2021/nr-occ-2021-138.html?source=email.
    \976\ Gregg Gelzinis and Graham Steele, Climate Change Threatens
the Stability of the Financial System, Center for American Progress
(Nov. 21, 2019, 12:01 a.m.), available at https://www.americanprogress.org/issues/economy/reports/2019/11/21/477190/climate-change-threatens-stability-financial-system.
    \977\ See The Availability Of Data with Which to Monitor and
Assess Climate-Related Risks to Financial Stability, The Financial
Stability Board (``FSB'') (July 7, 2021) (stating that the
availability of data with which to monitor and assess climate-
related risks to financial stability), available at https://www.fsb.org/2021/07/the-availability-of-data-with-which-to-monitor-and-assess-climate-related-risks-to-financial-stability/.
---------------------------------------------------------------------------

    In the face of such losses, financial intermediaries may be forced
to sell off assets at fire-sale prices to generate enough cash to pay
claims or to otherwise meet the time-sensitive cash demands of
creditors and counterparties. This fire-sale dynamic could push down
asset prices as well as the value of firms holding similar assets due
to mark-to-market losses, potentially increasing risk premia and
correlations across asset classes.\978\ Stress from large, complex, and
interconnected financial institutions, or correlated stress across
smaller market participants, could be transmitted and propagate through
the financial system,\979\ causing disruptions in the provision of
financial services.\980\ A more efficient allocation of capital brought
about the disclosure required by the proposed rules could reduce the
probability and magnitude of disorderly price corrections or
dislocations, thereby strengthening financial system resilience.\981\
---------------------------------------------------------------------------

    \978\ The Implications of Climate Change for Financial
Stability, FSB, available at https://www.iii.org/fact-statistic/facts-statistics-global-catastrophes (2021).
    \979\ Physical risks can have immediate and direct effects on
asset values, but they also present long-term indirect risks. By
damaging assets that serve as collateral for loans or that underpin
other investments, reducing property values, increasing insurance
premiums or decreasing insurance coverage, diminishing agricultural
capacity, and causing labor forces to migrate, the physical
consequences of climate change could have profound and long term
effects on financial markets more generally. See Jonathan Woetzel et
al., Climate Risk and Response: Physical Hazards and Socioeconomic
Impacts, McKinsey Global Institute (Jan. 2020), available at https://www.mckinsey.com/business-functions/sustainability/our-insights/climate-risk-and-response-physical-hazards-and-socioeconomic-impacts.
    \980\ A recent report by an advisory committee to the Commodity
Futures Trading Commission (CFTC) concluded that ``climate change
poses a major risk to the stability of the U.S. financial system and
to its ability to sustain the American economy.'' See Report of the
Climate-Related Market Risk Subcommittee, Market Risk Advisory
Committee of the U.S. Commodity Futures Trading Commission, Managing
Climate Risk in the U.S. Financial System (2020). The Office of the
Comptroller of the Currency (OCC) has identified the effects of
climate change and the transition to a low carbon economy as
presenting emerging risks to banks and the financial system. See,
e.g., Semiannual Risk Perspective, 2-4 (Fall 2021), available at
https://www.occ.treas.gov/publications-and-resources/publications/semiannual-risk-perspective/files/pub-semiannual-risk-perspective-fall-2021.pdf.
    \981\ See The Availability Of Data with Which to Monitor and
Assess Climate-Related Risks to Financial Stability, (July 7, 2021)
(stating that the availability of data with which to monitor and
assess climate-related risks to financial stability), available at
https://www.fsb.org/2021/07/the-availability-of-data-with-which-to-monitor-and-assess-climate-related-risks-to-financial-stability/.
---------------------------------------------------------------------------

2. Competition
    The provisions included in the proposed rules are expected to
increase comparability among registrants by demanding climate-related
information in a consistent manner and with machine-readable data
language (Inline XBRL). More standardized climate reporting could
improve competition among registrants as it could reduce their costs
for both producing such information due to enhanced efficiencies of
scale across the economy and the cost for acquiring and processing said
information by investors.
    As discussed in Section IV.C.2, positive externalities from
standard reporting practices can provide market-wide cost savings to
registrants in the long-term, to the extent that they reduce
duplicative effort in registrants' production and acquisition of
information (e.g. certain data or third-party services related to
preparing the required disclosures, including the reporting of
emissions data, may become cheaper in the long run as the heightened
demand spur competition, innovation, and other economies of scale).
These cost savings could be particularly helpful for smaller
registrants, or those that are capital constrained, which otherwise may
not be able to provide the same amount, or level of detail, of climate-
related disclosures as registrants with greater resources.
    More standardized reporting should also reduce investors' costs for
acquiring and processing climate-related information by facilitating
investors' analysis of a registrant's disclosure and assessing its
climate-related risks against those of its competitors. The placement
of climate-related information in SEC filings with machine-readable
data language (Inline XBRL), rather than external reports or company
websites, should also make it easier for investors to find and compare
this information.
    Overall, we expect that by standardizing reporting practices, the
proposed rules would level the playing field among firms, making it
easier for investors to assess the climate-related risks of a
registrant against those of its competitors. The effects of peer
benchmarking can contribute to increased competition for companies in
search for capital both across and within industries, whereby firms can
be more easily assessed and compared by investors against alternative
options.
    Failure to implement the proposed rules could lead to an
informational gap between U.S. registrants and companies

operating in foreign jurisdictions which require climate-related
disclosures. For example, such a gap may increase investors'
uncertainty when assessing climate-related risks of U.S. registrants
vis-[agrave]-vis foreign competitors and place U.S. registrants at a
competitive disadvantage, with the potential to deter investments and
hence increase U.S. registrants' cost of capital. This informational
gap may also pose obstacles to U.S. companies transacting with
counterparts and businesses in their supply-chain operating in foreign
jurisdictions which require Scope 3 emission disclosures. According to
Morningstar, more than 35% of S&P 500 firms' total revenues came from
foreign markets, while this percentage is around 20% for the revenues
of Russell 2000 firms.\982\ Lack of standardized disclosures around
Scope 1 and 2 GHG emission by U.S. companies, which may in part be due
to the aforementioned impediments to voluntary disclosure,\983\ may
obstruct foreign counterparts from accurately assessing their Scope 3
GHG emissions, thus putting U.S. registrants at a competitive
disadvantage over other foreign companies which may be publicly
disclosing such information.
---------------------------------------------------------------------------

    \982\ See, https://www.morningstar.com/articles/918437/your-us-equity-fund-is-more-global-than-you-think.
    \983\ See Section IV.B.2.
---------------------------------------------------------------------------

3. Capital Formation
    More consistent, comparable, and reliable disclosures could lead to
capital-market benefits in the form of improved liquidity, lower costs
of capital, and higher asset prices (or firm valuations).\984\ Enhanced
disclosures (e.g., accurate GHG emissions disclosures) can reduce the
time necessary for processing registrant's relevant information, thus
increasing efficiency for registrants in their access to capital and
allowing the market to more efficiently assess its cost. These benefits
would stem from reductions in information asymmetries brought about by
the required disclosure of climate-related information. More
comparable, consistent, and reliable climate-related disclosures could
reduce information asymmetries, both among investors and between firms
and their investors.
---------------------------------------------------------------------------

    \984\ See D.W. Diamond and R.E. Verrecchia, Disclosure,
Liquidity, and the Cost of Capital, 46 J. Fin.1325 (1991) (this
study finds that revealing public information to reduce information
asymmetry can reduce a firm's cost of capital through increased
liquidity); See also C. Leuz and R.E. Verrecchia, The Economic
Consequences of Increased Disclosure, 38 J. Acct. Res. 91 (2000).
Several studies provide both theoretical and empirical evidence of
the link between information asymmetry and cost of capital. See,
e.g., T.E. Copeland and D. Galai, Information Effects on the
Bid[hyphen]Ask Spread, 38 J. Fin. 1457 (1983) (proposing a theory of
information effects on the bid-ask spread); D. Easley and M. O'Hara,
Information and the Cost of Capital, 59 J. Fin. 1553 (2004) (This
study shows that differences in the composition of information
between public and private information affect the cost of capital,
with investors demanding a higher return to hold stocks with greater
private information.).
---------------------------------------------------------------------------

    In the first case, less information asymmetry among investors could
mitigate adverse selection problems by reducing the informational
advantage of informed traders.\985\ This is likely to improve stock
liquidity (i.e., narrower bid-ask spreads), which could attract more
investors and reduce the cost of capital. In the second case, less
information asymmetry between firms and their investors could allow
investors to better estimate future cash flows, which could reduce
investors' uncertainty, as well as the risk premium they demand, thus
lowering the costs of capital.\986\
---------------------------------------------------------------------------

    \985\ See R.E. Verrecchia, Essays on Disclosure, 32(1-3) Journal
of Accounting and Economics 97-180 (2001).
    \986\ See supra note 841; See also D.W. Diamond and R.E.
Verrecchia, Disclosure, Liquidity, and the Cost of Capital, 46(4)
The Journal of Finance 1325-1359 (1991).
---------------------------------------------------------------------------

    Recent studies provide some supporting empirical evidence of these
effects within the context of ESG- or climate-related disclosure. These
studies have found that, when firms voluntarily provide material
sustainability disclosures, they also experience improvements in
liquidity (e.g. smaller bid-ask spreads).\987\ In addition, firms that
choose to disclose emissions have lower costs of equity and loan
spreads.\988\ While firms' decisions about whether and when to disclose
emissions data may be correlated with other factors as well asset
prices/financing costs, this would be consistent with such disclosures
reducing the costs of capital for firms (to the extent that some of
these effects are driven by the disclosures themselves).
---------------------------------------------------------------------------

    \987\ See J. Grewal, C. Hauptmann, and G. Serafeim, Material
Sustainability Information and Stock Price Informativeness, Journal
of Business Ethics 1-32 (2020); M.E. Barth, S.F. Cahan, L. Chen, and
E.R. Venter, Integrated Report Quality: Share Price Informativeness
and Proprietary Costs, Socially Responsible Investment eJournal
(2021).
    \988\ See D.S. Dhaliwal et al., Voluntary Nonfinancial
Disclosure and the Cost of Equity Capital: The Initiation of
Corporate Social Responsibility Reporting, 86.1 The Accounting
Review 59-100 (2011; S. Kleimeier, and M. Viehs, Carbon Disclosure,
Emission Levels, and the Cost of Debt, Emission Levels, and the Cost
of Debt (2018); E.M. Matsumura, R. Prakash, and S.C. Vera-Munoz.
Climate Risk Materiality and Firm Risk, available at SSRN 2983977
(2020).
---------------------------------------------------------------------------

E. Other Economic Effects

    The proposed rules may have some effects on firm behavior. Prior
empirical evidence supports the notion that, in response to mandatory
ESG-related disclosure rules, firms tend to report actions that appear
more ``favorable'' with respect to the corresponding disclosures. These
decisions would be made by a firm's management with the goal of
maximizing firm value in response to the new disclosure mandate. To the
extent that these actions reduce firms' exposures to physical and
transition risks, this could lower the return that investors require
for investing in these firms, hence facilitating capital formation.
This could reduce volatility of stock returns due to enhanced
resiliency against such risks.
    Empirical evidence shows that mandatory reporting of GHG emissions
results in reduced aggregate reported emissions among affected
firms.\989\ Academic research shows that mandatory ESG-related
disclosure often contributes, not only to increased monitoring by
investors or other stakeholders, but also to enhanced peer benchmarking
by firms as they can more easily compare themselves with their
competitors.\990\ These changes may reflect market responses by
companies and investors to the newly disclosed information.
Accordingly, registrants may change their behavior in response to the
proposed disclosure requirements by reducing exposures to certain
physical or transition risks. However, this could also come with the
potential cost of lower productivity, profitability, or market share in
the short-term.
---------------------------------------------------------------------------

    \989\ See B. Downar, J. Ernstberger, S. Reichelstein, S.
Schwenen, and A. Zaklan, The Impact of Carbon Disclosure Mandates on
Emissions and Financial Operating Performance, Review of Accounting
Studies 1-39 (2021); S. Tomar, Greenhouse Gas Disclosure and
Emissions Benchmarking (Working Paper) (2021), available at: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3448904; See supra note
850 (Jouvenout and Kruger, 2021).
    \990\ See supra note 841.
---------------------------------------------------------------------------

    Registrants might respond to the proposed disclosures by devoting
more resources to climate-related governance and risk management in an
effort to address indirect effects on their business arising from the
disclosures. For example, the proposed rules require disclosure of
members of the board or management that have prior climate expertise.
Some registrants may respond by giving more weight to climate expertise
when searching for directors, which may lead them to deviate from the
board composition that would have been in place absent the proposed
rules. Similarly, the proposed rules would require disclosure on how
climate-related risks can impact registrants' consolidated financial
statements, among others. Registrants may respond by taking measures to
minimize

negative impacts in order to put forth more favorable metrics. For
example, registrants may move assets or operations away from geographic
areas with higher physical risk exposures or may seek to decrease GHG
emissions.
    The provision on GHG Emissions would also require scope 1, 2, and 3
(if material or the registrant has a set a target or goal for scope 3)
emission disclosures. These emission disclosures may induce firms to
use peer benchmarking to decide whether to investigate and reevaluate
their energy usage \991\ or otherwise reduce emissions based on
anticipated market reactions to the disclosed information. This process
may provide certain registrants with incentives to search for
alternative energy sources or find different suppliers, which could
increase costs. Conversely, it could also prompt certain firms to
reduce nonessential activities and improve operational efficiency,
which could lead to lower operating costs.
---------------------------------------------------------------------------

    \991\ See supra note 841.
---------------------------------------------------------------------------

    The provision requiring assurance of GHG Scopes 1 and 2 emissions
disclosures would only apply to accelerated filers. Non-accelerated
filers would, instead, be required only to state whether any of their
GHG emissions disclosures were subject to third-party assurance, and if
so, at what level. By asking all registrants, including non-accelerated
filers, to disclose climate-related information within SEC filings,
however, the proposed rules may motivate more non-accelerated filers to
voluntarily seek assurance over these types of disclosures, than if the
same information had been disclosed on companies' websites or
sustainability reports. Certain non-accelerated filers may also
voluntarily decide to attain assurance over their GHG emission
disclosures in order to enhance their reliability and prevent these
disclosures from being perceived by investors as less reliable compared
to those provided by accelerated filers.
    As another example, the proposed rules would require the disclosure
of the location (via ZIP code) of firm assets or operations, which
could allow investors to assess firms' exposures to physical risk at a
more granular level. This may allow investors to more easily diversify
these geographic-driven risks or expose themselves to such risks, if
they choose to, more deliberately. This may cause some firms to
relocate assets or operations to geographical areas less exposed to
physical risks and/or give preferences to such areas for future
business activity. It may also cause some firms with higher geographic
exposures to physical risks to alter overall operational risk and
strategies.
    The proposed rules might also affect the networks firms choose to
operate in. For example, a firm may choose to change some suppliers or
disengage with certain clients due to the effect that they may have on
the firm's Scope 3 emissions. This may be particularly relevant for
certain financial institutions that are impacted by their portfolio
firms' emissions or climate-related risks. These financial institutions
may be less willing to extend credit to firms for which it is difficult
to measure climate risk exposure information, potentially increasing
the cost of capital for these firms.
    However, there are certain factors that may mitigate this effect.
First, the proposed rules establish a phase-in period, which is
intended to give financial institutions and their prospective borrowers
sufficient time to prepare the required disclosures. Second, analytical
tools, data, and related methodologies (such as those related to
measuring/reporting GHG emissions) are developing rapidly and
increasing in availability. Finally, frameworks like the PCAF to
measure financed emissions would allow financial institutions to
compute proxies for the emissions of their clients in a systematic and
comparable manner even in the absence of actual emissions data.
    The proposed rules could also cause some firms to pursue avoidance
strategies. The provision on Targets and Goals would require a
registrant to disclose whether it has set any climate-related targets
or goals and the specific plans in place to achieve those objectives
and metrics to monitor progress. This may disincentivize certain firms
from making such commitments and providing the associated disclosures
in SEC filings. Risk of litigation or enforcement actions, could result
in registrants being more cautious in their decision to set climate-
related targets. Other firms, however, may find the existence of
mandatory disclosures around climate-related targets and goals to be
beneficial for signaling credible value-enhancing commitments to
investors. More credible and standardized disclosures on climate-
related targets and goals could make registrants' communication more
effective and facilitate investors' understanding of related progress,
hence providing additional incentives for making such commitments.
    More generally, if compliance costs with the proposed rules are
high, this could influence the marginal firm's decision to exit public
markets or refrain from going public in the first place in order to
circumvent the disclosure requirements. Firms may choose this strategy
if they believe the potential compliance costs from the proposed rules
outweigh the benefits of being registered public company. Uptake of
this avoidance strategy may widen the transparency gap between public
and private firms, negatively affecting capital markets' information
efficiency, and potentially reduce the size of the stock market.
However, it is unlikely that a significant number of firms would pursue
this avoidance strategy given that it would come with significant
disadvantages, such as higher costs of capital, limited access to
capital markets, and limits to their growth potential. Moreover, recent
trends in private markets indicate that industry's top leaders are
working toward a standard set of metrics for tracking their portfolio
companies' ESG progress. The pressure on private companies to disclose
information on climate-related risks is rapidly escalating within the
private industry, hence diminishing the potential incentive for
registrants to go private in order to avoid climate-related disclosure
requirements. For example, since its launch in September 2021, the ESG
Data Convergence Project, which seeks to standardize ESG metrics and
provide a mechanism for comparative reporting for the private market
industry, has announced a milestone commitment of over 100 leading
general partners and limited partners to its partnership representing
$8.7 trillion USD in AUM and over 1,400 underlying portfolio companies
across the globe. The initial data for the project includes, among
others, greenhouse gas emissions and renewable energy metrics.\992\
---------------------------------------------------------------------------

    \992\ See Carlyle, Private Equity Industry's First-Ever ESG Data
Convergence Project Announces Milestone Commitment of Over 100 LPs
and GPs (Jan. 28, 2022), available at https://www.carlyle.com/media-room/news-release-archive/private-equity-industrys-first-ever-esg-data-convergence-project-announces-over-100-lps-gps.
---------------------------------------------------------------------------

F. Reasonable Alternatives

1. Requirements Limited to Only Certain Classes of Filers
    One alternative would be to require the proposed disclosures only
from larger registrants, such as large accelerated filers or non-SRCs.
While the proposed rules already provide certain exemptions for SRCs
(e.g., Scope 3 emissions disclosures and assurance requirements), this
alternative would exempt smaller registrants from the entirety of the
proposed rules. The main benefit of this alternative is that it

would avoid imposing potentially significant compliance costs on
smaller registrants, which are more likely to be resource-constrained.
However, considering that SRCs make up approximately 50% of registrants
(and registrants that are not large accelerated filers make up
approximately 70%), this alternative would also considerably undermine
one of the primary objectives of the proposed rules, which is to
achieve consistent, comparable, and reliable disclosures of climate-
related information. Furthermore, climate-related risks are impacting
or are expected to impact every sector of the economy,\993\ further
highlighting the need for enhanced disclosures from all registrants. In
an effort to arrive at an appropriate balance between these costs and
benefits, the proposed rules exempt SRCs from some, but not all,
disclosure requirements.
---------------------------------------------------------------------------

    \993\ SASB research shows climate risk is nearly ubiquitous but
highly differentiated across 77 industries. See SASB Publishes
Updated Climate Risk Technical Bulletin (Apr. 13, 2021), available
at https://www.globenewswire.com/news-release/2021/04/13/2208855/0/en/SASB-Publishes-Updated-Climate-Risk-Technical-Bulletin.html.
---------------------------------------------------------------------------

2. Require Scenario Analysis
    Another alternative would be to require registrants to conduct
scenario analysis and include the related information in their
disclosures. Consistent, comparable, and reliable disclosures of
scenario analysis could inform investors with respect to the resilience
of registrants' business strategies and operations across a range of
plausible future climate scenarios. Disclosure of scenario analysis
could deliver informational benefits to investors beyond that which
would be provided under the proposed rules. It could help investors
assess issues that have high uncertainty by evaluating the impact on
and the resiliency of the registrant under multiple plausible future
scenarios, such as a temperature increase of 1.5[deg]C, 2[deg]C, and
3[deg]C above pre-industrial levels. It could also allow investors to
proactively manage risk as they would be better able to assess the
range of potential threats and opportunities, evaluate different
management actions, and adapt accordingly. Furthermore, since some
climate-related risks may only manifest over longer horizons, scenario
analysis could assist investors in determining whether registrants have
incorporated such risks into their long-term strategy. Investors could
subsequently incorporate this information into asset prices, thereby
more accurately pricing climate-related risks and contributing to
market efficiency.
    Both scenario analysis methodologies and climate science, however,
continue to advance and develop, which may pose significant challenges
for some registrants. Specifically, the required data may be
unavailable or costly to obtain. Furthermore, some registrants may lack
the necessary expertise, requiring them to hire external consultants to
conduct the analysis. These challenges may pose undue burdens with
respect to difficulty and/or costs to some registrants, such as smaller
companies and those that otherwise have no prior experience in scenario
analysis. For these reasons, the Commission is not proposing to mandate
scenario analysis and related disclosure at this time.
3. Require Specific External Protocol for GHG Emissions Disclosure
    Another alternative would be to require registrants to follow an
external protocol (e.g., GHG protocol) for reporting emissions.
Requiring a specific protocol may potentially benefit investors by
providing a more consistent and comparable framework in reporting
emissions, thus facilitating investors' information processing.
However, there also may be certain drawbacks.
    First, the organizational boundaries adopted by external protocols
may create inconsistencies with the way companies would report
information about their GHG emissions vis-[agrave]-vis the rest of
their financial statements. The GHG Protocol, for example, requires
that a company base its organizational boundaries on either an equity
share approach or a control approach, which may differ from the way
registrants set their scope for the purpose of reporting information in
their financial statements. The proposed rules would require a
registrant to set the organizational boundaries for its GHG emissions
disclosure using the same scope of entities, operations, assets, and
other holdings as those included in its consolidated financial
statements. Requiring a consistent scope of consolidation and reporting
between financial data and GHG emissions data should help avoid
potential investor confusion about the reporting scope used in
determining a registrant's GHG emissions and the reporting scope used
for the financial statement metrics.
    Furthermore, requiring companies to follow a specific external
protocol might limit flexibility for registrants and thus reduce their
ability to report emissions in a manner that is tailored to their
specific circumstances. For example, registrants following an existing
but different protocol, which nevertheless provides relevant emissions
information, would be required to switch protocols, incurring
additional cost.
    Requiring compliance with a specific protocol could also reduce the
scope for innovation in driving the most appropriate forms of
disclosure within these overarching guidelines (e.g., the methodologies
pertaining to the measurement of GHG emissions, particularly Scope 3
emissions, are still evolving). Additionally, requiring compliance with
a specific external protocol as of the date of the adoption of any
final rules may become problematic in the future to the extent that the
external protocol's methodologies shift or evolve such that the version
incorporated by reference into the final rules becomes outdated or
inconsistent with improving methodologies. While we expect that many
registrants will choose to follow many of the standards and guidance
provided by the GHG Protocol when calculating their GHG emissions, not
requiring compliance with the GHG Protocol would provide some
flexibility to the Commission's climate-related disclosure regime and
enable registrants to follow new and potentially less costly
methodologies as they emerge.
4. Permit GHG Emissions Disclosures To Be ``Furnished'' Instead of
``Filed''
    Another alternative would be to permit Scopes 1, 2, and 3 emissions
disclosures to be considered ``furnished'' instead of ``filed,'' which
may limit the incremental risk of being held liable under Section 18 of
the Exchange Act for these disclosures. This may also benefit some
registrants as their Scopes 1 and 2 emissions disclosures would not be
automatically incorporated into Securities Act registration statements
and thereby not be subject to Section 11 liability. We note that this
could have a lower incremental impact on Scope 3 emissions disclosures
since Scope 3 emissions disclosures are covered under a proposed safe
harbor provision and hence already afforded other liability
protections. However, reduced liability in general may lead to the
applicable disclosures being perceived as less reliable by investors,
which could have adverse effects on registrants' stock liquidity or
costs of capital. For these reasons, the Commission is not proposing to
permit emissions disclosures to be furnished at this time.
5. Do Not Require Scope 3 Emissions for Registrants With a Target or
Goal Related to Scope 3
    Another alternative would be to not require Scope 3 emissions
disclosures if

such emissions are part of a target or goal from any registrant. This
would allow certain registrants to avoid the potentially significant
costs and difficulties associated with measuring and reporting Scope 3
emissions. This could potentially deprive investors of important
information necessary to assess registrants' exposures to certain risks
associated with trying to achieve targets or transition plans. Scope 3
emissions can provide investors with a more complete picture of how
targets or transition plans might impact risks (e.g., future
regulations restricting emissions or changes in market conditions that
disfavor high emissions products or services) of the registrant through
the value chain. This can be particularly important considering that
Scope 3 emissions can make up the vast majority of total emissions for
many registrants.\994\ Furthermore, some firms can give the appearance
of low (direct) emissions by shifting high-emission activities
elsewhere in their value chain.\995\ Mandatory disclosure of Scope 3
emissions for registrants with a target or goal related to Scope 3
emissions can help prevent such misrepresentation.
---------------------------------------------------------------------------

    \994\ See supra, note 888.
    \995\ See supra, note 893.
---------------------------------------------------------------------------

6. Exempt EGCs From Scope 3 Emissions Disclosure Requirements
    Another alternative would be to retain the exemption for SRCs, as
currently proposed, but also extend it to EGCs. EGCs may similarly face
resource constraints related to company size or age, hence this
alternative would allow EGCs to avoid the costs of Scope 3 emissions
measurement and reporting. Given that the designations of SRC and EGC
are not mutually exclusive, however, EGCs that are also SRCs would be
covered under the exemption as currently proposed. Conversely, EGCs
that are not SRCs are relatively less resource-constrained since they,
by definition, have greater revenues and/or public float, and therefore
may be better positioned to provide Scope 3 emissions disclosures.
7. Eliminate Exemption for SRCs From Scope 3 Reporting
    Another alternative would be to eliminate the exemption for SRCs.
Because SRCs make up approximately half of domestic filers in terms of
numbers (though considerably less in terms of market cap), this
alternative could address data gaps with respect to Scope 3 emissions,
with the potential to benefit all investors. As discussed in Section
II.G.3, however, this alternative may pose fixed costs (e.g. data
gathering and verification), that would fall disproportionately on
SRCs. Also, because SRCs are a small fraction of the market, the
overall benefit to investors would be limited.
8. Remove Safe Harbor for Scope 3 Emissions Disclosures
    The proposed rules provide a safe harbor for Scope 3 emissions
disclosures. An alternative would be to remove this safe harbor for
Scope 3 emissions disclosures. This alternative would strengthen
accountability for Scope 3 emissions disclosures. It also would
significantly increase registrants' exposure to litigation over the
accuracy of such disclosures. While rigorous liability in many contexts
can provide incentives that promote reliable disclosures, an
accommodation may be warranted for Scope 3 emissions due to the
challenges associated with their measurement and disclosure.\996\
---------------------------------------------------------------------------

    \996\ See Section II.G.3
---------------------------------------------------------------------------

9. Require Large Accelerated Filers and Accelerated Filers To Provide a
Management Assessment and To Obtain an Attestation Report Covering the
Effectiveness of Controls Over GHG Emissions Disclosures
    The proposed rules would require assurance over Scopes 1 and 2
emissions disclosure from large accelerated filers and accelerated
filers. In addition to such assurance, we could require these filers to
also obtain either a separate assessment by management and disclosure
on the effectiveness of controls over GHG emissions disclosures or an
attestation report specifically covering the effectiveness of controls
over GHG emissions disclosures, or both. Specifically, management could
be required to include a statement in the annual report on their
responsibility for the design and evaluation of controls over GHG
emission disclosures, as well as to disclose their conclusion regarding
the effectiveness of controls over GHG emissions disclosures, in
addition to the existing DCP evaluation and disclosure. In addition, we
could require a GHG emissions attestation provider to obtain reasonable
assurance on whether material weaknesses exist regarding management's
assessment of the effectiveness of controls over GHG emissions
disclosures as of the measurement date. The GHG emissions attestation
provider could also be required to issue an attestation report on the
effectiveness of controls over GHG emissions disclosures.\997\
---------------------------------------------------------------------------

    \997\ See AICPA, AU-C 940, An Audit of Internal Control Over
Financial Reporting That Is Integrated With an Audit of Financial
Statements (2021), available at https://www.aicpa.org/content/dam/aicpa/research/standards/auditattest/downloadabledocuments/au-c-00940.pdf.
---------------------------------------------------------------------------

    By requiring GHG emissions attestation providers to assess not just
the disclosures, but also the controls over GHG emissions disclosures
(i.e., the underlying mechanisms, rules, and procedures associated with
generating such disclosures), this alternative could further strengthen
the integrity of the disclosed information. In the context of
emissions, GHG emissions attestation providers may evaluate and test
the effectiveness of registrants' controls related to the collection,
calculation, estimation, and validation of GHG emissions data and
disclosure. These processes could strengthen disclosure credibility as
they reduce the likelihood of errors or fraud and their ensuing
misstatements.\998\ Investors would benefit from any resulting
improvement in disclosure reliability for reasons discussed in prior
sections: It would allow investors to make better-informed investment
decisions, allow applicable information to be better incorporated into
asset prices, and contribute to a more efficient allocation of capital.
Registrants may also benefit via reduced costs of capital and increased
stock liquidity.
---------------------------------------------------------------------------

    \998\ Potentially consistent with this, though in a different
setting, academic evidence surrounding Section 404 of the Sarbanes-
Oxley Act (SOX) finds lower accruals and discretionary accruals for
small firms whose 2002 float (prior to when firms could have known
and therefore tried to alter their float to avoid the regulation)
made them likely to be just above the requirements for compliance,
relative to those just below. Iliev, Peter (2010). The effect of SOX
Section 404: Cost, earnings quality and stock prices. Journal of
Finance, 65, 1163-1196.
---------------------------------------------------------------------------

    However, this alternative would also impose additional assurance
costs.\999\ Given that GHG emissions measurement and disclosure are
developing areas, it is unclear what exact controls are or would be in
effect, making it difficult to anticipate precisely what such
attestation would entail. These uncertainties pose further difficulties
in obtaining informative cost estimates and, accordingly, accurate
assessments of how burdensome such a requirement would be to
registrants. This leaves the

possibility that the costs could outweigh the incremental benefits
given that the proposed rules already require assurance for Scopes 1
and 2 emissions disclosures for applicable registrants. For these
reasons, the Commission is not proposing at this time to require an
attestation report on the effectiveness of controls over GHG emissions
disclosures.
---------------------------------------------------------------------------

    \999\ Also potentially consistent with this, prior academic
studies of Section 404 of SOX find significantly higher auditing
fees, negative stock returns, and reduced innovation, though no
clear evidence of a decline in investment, for marginally complying
small firms near the float requirement threshold. See Iliev, Peter
(2010). The effect of SOX Section 404: Cost, earnings quality and
stock prices. Journal of Finance, 65, 1163-1196; Gao, Huasheng, and
Jin Zhang (2019). SOX Section 404 and corporate innovation. Journal
of Financial and Quantitative Analysis 54(2): 759-787; Albuquerque,
Ana and Julie Lei Zhu (2019). Has Section 404 of the Sarbanes-Oxley
Act discouraged corporate investment? New evidence from a natural
experiment. Management Science 65(7): 3423-3446.
---------------------------------------------------------------------------

10. Require Reasonable Assurance for Scopes 1 and 2 Emissions
Disclosures From All Registrants
    Another alternative would be to require reasonable assurance for
Scopes 1 and 2 emissions disclosures from all registrants. As described
above, requiring assurance can benefit investors in several ways,
including enhanced reliability of disclosures, which would allow
investors to make better-informed investment decisions
    However, because costs increase with the level of assurance,
requiring reasonable assurance may be particularly burdensome for
affected registrants (i.e., smaller firms) as they would be more likely
to incur proportionately higher compliance costs due to the fixed cost
components of such compliance, regardless of whether or not there is a
transition period before this requirement takes effect. While the
benefits of assurance could be approximately proportional to
registrant's market value, the costs are not. In an effort to arrive at
an appropriate balance between these factors, the proposed rules would
require reasonable assurance (after a specified transition period) only
from large accelerated filers and accelerated filers because the
benefits to investors are more likely to justify the costs for these
firms.
11. Require Limited, Not Reasonable, Assurance for Large Accelerated
Filers and/or Accelerated Filers and/or Other Filers
    Obtaining reasonable assurance generally costs more than obtaining
limited assurance. Current market practice appears to favor obtaining
limited assurance over sustainability reports, if assurance is obtained
at all. Experimental evidence suggests assurance (relative to none) may
increase perceived reliability of sustainability reports, but is yet to
provide evidence that reasonable assurance increases perceived
reliability of sustainability reports relative to limited
assurance.\1000\ We acknowledge, however, that experimental findings
from lab settings may not necessarily reflect the behavior or
preferences of experienced investors in actual financial markets.
Furthermore, other research often exhibits a selection bias (i.e.,
companies that voluntarily decide to obtain a higher-than-required
level of assurance are systematically different across several
dimensions), making it difficult to determine the causal effect of the
different levels of assurance.\1001\
---------------------------------------------------------------------------

    \1000\ See, e.g., K. Hodge, K., N. Subramaniam, and J. Stewart,
Assurance of Sustainability Reports: Impact on Report Users'
Confidence and Perceptions of Information Credibility, 19 Australian
Accounting Review 178-194 (2009), available at https://doi.org/10.1111/j.1835-2561.2009.00056.x; Mark Sheldon, User Perceptions of
CSR Disclosure Credibility with Reasonable, Limited and Hybrid
Assurances (Dissertation) (2016) available at https://vtechworks.lib.vt.edu/bitstream/handle/10919/65158/Sheldon_MD_D_2016.pdf.
    \1001\ See C.H. Cho, G. Michelon, D.M. Patten, and R.W. Roberts,
CSR report assurance in the USA: An empirical investigation of
determinants and effects, 5 (2) Sustainability Accounting,
Management and Policy Journal 130, 130-148 (2014), available at
https://doi.org/10.1108/SAMPJ-01-2014-0003.
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    One possibility to mitigate the additional costs of reasonable
assurance would be to maintain the requirement that large accelerated
filers obtain reasonable assurance, but allow accelerated filers to
obtain limited assurance without any scaling up to a reasonable
assurance. Another possibility would be to require limited assurance,
but expand the assurance requirement to a broader scope of registrants
including non-accelerated filers and smaller reporting companies.
However, these possibilities have the disadvantage of lack of
consistency, which could lead to confusion among investors.
12. In Lieu of Requiring Assurance, Require Disclosure About Any
Assurance Obtained Over GHG Emissions Disclosures
    Another alternative would be to require all registrants to disclose
what type of assurance they are receiving, if any, in lieu of requiring
assurance. This would potentially allow affected registrants to avoid
the costs of obtaining limited assurance and/or reasonable
assurance.\1002\ Additionally, registrants would have the flexibility
to choose any level of assurance (i.e., none, limited, or reasonable
assurance) but still be required to disclose their choice for
transparency. This alternative, however, may reduce the reliability and
comparability of these disclosures relative to the standardized
assurance requirements within the proposed rules. In addition, as it
does not set any minimum requirements for the assurance, this
alternative would not address the fragmentation and selective
disclosure issues that characterize the current, voluntary reporting
regime.
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    \1002\ See Section IV.C.2.(3) for cost estimates of assurance
over emissions disclosures.
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13. Permit Host Country Disclosure Frameworks
    Another alternative would be to permit alternative compliance using
host country disclosure frameworks that the Commission deems suitable.
Such an alternative would be beneficial for registrants that already
comply with another country's disclosure requirements since they could
avoid incurring additional costs to comply with the Commission's rules.
This flexibility, however, may fail to address or may even exacerbate
growing concerns from investors that climate-related disclosures lack
comparability and consistency. While it might be individually optimal
for a given firm to use their existing host country disclosure
frameworks, the potential lack of consistency and comparability of the
disclosure between these firms and other registrant might impose costs
on investors. Investors might not able to compare across firms using
different disclosure presentations, or may have to incur additional
costs in order to do so.
14. Alternative Tagging Requirements
    With respect to Inline XBRL tagging, one alternative is to change
the scope of disclosures required to be tagged. We could, for example,
remove the tagging requirements for climate-related disclosures for all
or a subset of registrants (such as smaller reporting companies). As
another example, we could require only a subset of proposed climate-
related disclosures, such as the quantitative climate-related metrics,
to be tagged in Inline XBRL. Narrowing the scope of climate-related
disclosures to be tagged could provide some incremental cost savings
for registrants compared to the proposal, because incrementally less
time would be required to select and review the particular tags to
apply to the climate-related disclosures.
    We expect this incremental cost savings to be low because all
affected registrants are or in the near future will be required to tag
certain of their disclosures (including both quantitative and
qualitative disclosures) in Inline XBRL.\1003\ Moreover, narrowing the
scope of tagging requirements would

diminish the extent of informational benefits that would accrue to
investors by reducing the volume of climate-related information that
would become less costly to process and easier to compare across time
and registrants. For example, an alternative whereby only quantitative
climate-related disclosures would be tagged would inhibit investors
from efficiently extracting/searching climate-related disclosures about
registrants' governance; strategy, business model, and outlook; risk
management; and targets and goals, thus creating the need to manually
run searches for these disclosures through entire documents.\1004\ Such
an alternative would also inhibit the automatic comparison/redlining of
these disclosures against prior periods, and the performance of
targeted artificial intelligence or machine learning assessments
(tonality, sentiment, risk words, etc.) of specific narrative climate-
related disclosures outside the financial statements rather than the
entire unstructured document.
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    \1003\ Inline XBRL requirements for business development
companies will take effect beginning Aug. 1, 2022 (for seasoned
issuers) and Feb. 1, 2023 (for all other issuers). If the proposed
Inline XBRL requirements are adopted in the interim, they will not
apply to business development companies prior to the aforementioned
effectiveness dates. See supra note 706.
    \1004\ To illustrate, using a search string such as ``climate
change'' or ``greenhouse gas'' to search through the text of all
filings from a particular filer population so as to determine the
trends in narrative climate-related disclosure among that population
over time, could return many narrative disclosures outside of the
climate-related disclosures. Examples of this would be a description
of pending environmental litigation, existing government regulations
and agency names, and broader regulatory risk factors.
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G. Request for Comment

    We request comment on all aspects of our economic analysis,
including the potential costs and benefits of the proposed rules and
alternatives thereto, and whether the proposed rules, if adopted, would
promote efficiency, competition, and capital formation or have an
impact on investor protection. In addition, we also seek comment on
alternative approaches to the proposed rules and the associated costs
and benefits of these approaches. Commenters are requested to provide
empirical data, estimation methodologies, and other factual support for
their views, in particular, on costs and benefits estimates.
Specifically, we seek comment with respect to the following questions:
     Are there any costs and benefits to any entity that are
not identified or misidentified in the above analysis?
     Are there any effects on efficiency, competition, and
capital formation that are not identified or misidentified in the above
analysis?
     Are there any other alternative approaches to improving
climate-related disclosure that we should consider? If so, what are
they and what would be the associated costs or benefits of these
alternative approaches? For example, what would be the costs and
benefits of implementing a new, comprehensive system, for reporting and
transferring GHG emissions across corporate supply and distribution
chains, as described by Kaplan and Ramanna (2021)? \1005\
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    \1005\ See R. Kaplan and K. Ramanna, How to Fix ESG Reporting
(2021), available at https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3900146.
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     Are there any sources of data that could provide a more
precise estimation of the potential compliance costs that registrants
may incur if the proposed rules are adopted?
     Have we accurately estimated the costs of disclosing Scope
1 and 2 emissions? If not, please provide alternative estimates of
these costs.
     Have we accurately estimated the costs of disclosing Scope
3? If not, please provide alternative estimates of these costs.
     Are there any additional sources of information to
estimate the costs of complying with the Scopes 1, 2, and 3 GHG
emissions disclosure requirements and the costs of obtaining limited
and reasonable assurance for these disclosures?
     Would any data sources allow these compliance cost
estimates to be apportioned to separate provisions of the proposed
rules? Furthermore, how would these cost estimates vary across time
horizons? For example, the first year of implementation may come with
higher start-up costs while subsequent years may come with lower costs.
     Have we accurately characterized the cost of limited
assurance and reasonable assurance over Scopes 1 and 2 emissions? If
not, please provide an estimate of these costs. Similarly, is there
data that can show how the costs of limited assurance and reasonable
assurance differ for large accelerated, accelerated and non-accelerated
filers?
     How are the costs of obtaining limited assurance and
reasonable assurance likely to change over time (e.g., over the five
years following adoption or compliance with a specified level of
assurance)? What would be the costs and benefits of providing a longer
transition period for obtaining assurance over Scopes 1 and 2 emissions
disclosures?

V. Paperwork Reduction Act

A. Summary of the Collections of Information

    Certain provisions of our rules and forms that would be affected by
the proposed amendments contain ``collection of information''
requirements within the meaning of the Paperwork Reduction Act of 1995
(``PRA'').\1006\ The Commission is submitting the proposal to the
Office of Management and Budget (``OMB'') for review in accordance with
the PRA.\1007\ The hours and costs associated with preparing and filing
the forms and reports constitute reporting and cost burdens imposed by
each collection of information. An agency may not conduct or sponsor,
and a person is not required to respond to, a collection of information
requirement unless it displays a currently valid OMB control number.
Compliance with the information collections is mandatory. Responses to
the information collections are not kept confidential and there is no
mandatory retention period for the information disclosed. The titles
for the affected collections of information are:
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    \1006\ See 44 U.S.C. 3501 et seq.
    \1007\ 44 U.S.C. 3507(d) and 5 CFR 1320.11.
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     Form S-1 (OMB Control No. 3235-0065);
     Form F-1 (OMB Control No. 3235-0258);
     Form S-4 (OMB Control No. 3235-0324);
     Form F-4 (OMB Control No. 3235-0325);
     Form S-11 (OMB Control No. 3235-0067);
     Form 10 (OMB Control No. 3235-0064);
     Form 10-K (OMB Control No. 3235-0063);
     Form 10-Q (OMB Control No. 3235-0070);
     Form 20-F (OMB Control No. 3235-0288); and
     Form 6-K (OMB Control No. 3235-0116).\1008\
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    \1008\ The proposed amendments would also indirectly affect
Forms S-3 and F-3. Registrants filing Forms S-3 and F-3 are able to
incorporate by reference their annual reports filed on Forms 10-K or
20-F. Because the proposed amendments would affect Forms 10-K and
20-F, and are not expected to affect Forms S-3 and F-3 except when
Forms 10-K and 20-F are incorporated by reference into those
Securities Act forms, we are not separately accounting for the PRA
burden related to Forms S-3 and F-3.
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    The proposed amendments would require U.S. registrants filing
Securities Act registration statements on Forms S-1, S-4, and S-11 to
include the climate-related disclosures required under proposed subpart
1500 of Regulation S-K and proposed Article 14 of Regulation S-X. The
proposed amendments would also require foreign private issuers to
include the proposed climate-related disclosures when filing Securities
Act registration statements on Forms F-1 and F-4. The proposed
amendments would further require U.S. registrants and foreign private
issuers to include

the proposed climate-related disclosures in their Exchange Act annual
reports filed, respectively, on Forms 10-K and 20-F and in Exchange Act
registration statements filed, respectively, on Forms 10 and 20-F.
Registrants would be required to include the climate-related
information required under proposed subpart 1500 in a part of the
registration statement or annual report that is separately captioned as
Climate-Related Disclosure. Registrants would be required to include
the climate information required under Article 14 in a note to the
financial statements, which would be subject to audit. Further, as
described below, accelerated filers and large accelerated filers would
be required to include an attestation report covering their Scopes 1
and 2 emissions disclosure, subject to phase-ins. In addition, U.S.
registrants and foreign private issuers would be required to report
material changes to the climate information disclosed in their Exchange
Act reports on, respectively, Forms 10-Q and 6-K. A description of the
proposed amendments, including the need for the climate information and
its proposed use, as well as a description of the likely respondents,
can be found in Section II above, and a discussion of the economic
effects of the proposed amendments can be found in Section IV above.

B. Summary of the Proposed Amendments' Effects on the Collections of
Information

    Our estimates of the paperwork burden associated with the proposed
amendments are based primarily on climate-related reporting cost
estimates from six sources: A comment letter from the Society for
Corporate Governance (``Society'') that provided some hour and cost
estimates for climate reporting by large-cap companies; \1009\ a report
by the Climate Risk Disclosure Lab at Duke University School of Law's
Global Financial Markets Center that presents survey results of
climate-related disclosure costs for three unnamed companies; \1010\ an
impact assessment conducted by the United Kingdom's Department for
Business, Energy, and Industrial Strategy for a rule that, similar to
the Commission's proposed rules, would require TCFD-aligned disclosures
from all listed firms; \1011\ two cost estimates from a data analytics
firm--one that covered primarily risk assessment and analysis pursuant
to the TCFD framework, and the other for calculating GHG emissions;
\1012\ and cost estimates for GHG emissions measurement and reporting
from two climate management firms.\1013\
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    \1009\ See letter from Society for Corporate Governance.
    \1010\ See Climate Risk Disclosure Lab The Cost of Climate
Disclosure: Three Case Studies on the Cost of Voluntary Climate-
Related Disclosure (Dec. 2021), available at https://climatedisclosurelab.duke.edu/wp-content/uploads/2021/12/The-Cost-of-Climate-Disclosure.pdf.
    \1011\ See UK Department for Business, Energy, and Industrial
Strategy, Final Stage Impact Assessment (Oct. 1, 2021), available at
https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1029317/climate-related-financial-disclosure-consultation-final-stage-impact-assessment.pdf; see also
UK Department for Business, Energy, and Industrial Strategy, Initial
Impact Assessment (Jan. 29, 2021), available at https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/972423/impact-assessment.pdf . The scope of the
impact assessment included companies listed on the London Stock
Exchange with over 500 employees, UK registered companies admitted
to AIM with over 500 employees, and certain other companies.
    \1012\ See memorandum, dated Feb. 4, 2022, concerning staff
meeting with representatives of S&P Global. This and the other staff
memoranda referenced below are available at https://www-draft.sec.gov/comments/s7-10-22/s71022.htm.
    \1013\ See memorandum, dated Nov. 30, 2021, concerning staff
meeting with representatives of Persefoni; and memorandum, dated
Jan. 14, 2022, concerning staff meeting with representatives of
South Pole.
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    In response to Acting Chair Lee's request for public input about
climate disclosures,\1014\ Society submitted the results of a survey it
had conducted on a small number of public large-cap companies about the
costs of their current climate reporting. According to this commenter,
two companies estimated that the number of employee hours spent on
climate reporting ranged from 7,500 to 10,000 annually, while a third
company estimated the number of annual employee hours spent on climate
reporting to be 2,940 hours.\1015\ The average annual employee hours
spent on climate reporting for these large-cap companies was 6,813
hours.\1016\
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    \1014\ See supra Section I.B.
    \1015\ See letter from Society for Corporate Governance. This
commenter also stated that fees for external climate advisory
services ranged from $50,000 to $1.35 million annually.
    \1016\ 7,500 hrs. + 10,000 hrs. + 2,940 hrs. = 20,440 hrs.;
20,440/3 = 6,813 hrs.
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    The Climate Risk Disclosure Lab's report presents the results of
its survey of one European large-cap financial institution, one US
large-cap industrial manufacturing company, and one US mid-cap waste