Business Needs to Wake Up to the Reality of GHG Emissions Reporting
by Bruce Kahn, Ph.D.
At least the SEC is paying attention to Greenhouse Gas Emissions
If you missed it, the U.S. Securities & Exchange Commission (SEC) published its final rule on climate-related disclosure by publicly-traded companies in March of this year. In a nutshell, the rule, some two years and 24,000 comment letters in the making, will require companies to report on the “materiality” of greenhouse gas related topics in regulatory filings.
The rule requires Scope 3 disclosure (more on that later) if material or included in climate-related targets. The SEC is also requiring companies to report on all climate-related targets or goals, including the use of any CO2 offsets or credits to achieve such goals.
While a less-engaged student of sustainable investing might be nodding off at this point, stakeholders looking for more data-driven analysis of a company’s climate-related performance are paying close attention. We might suggest that students of all kinds of investing get their heads off their desks and start paying close attention. The fact is, quality greenhouse gas (GHG) emissions reporting is becoming an important part of doing business for global companies.
Anyone seen this before?
Those who’ve done their homework might recall that the Greenhouse Gas Protocol, which provides arguably the most widely recognized accounting standards for emissions, categorizes GHG emissions into three ‘scopes.’
- Scope 1 covers direct emissions from activities within a company’s control. These activities would include things like onsite fuel combustion from buildings and company vehicles as well as manufacturing and process emissions and direct emissions from agriculture.
- Scope 2 covers indirect emissions from any electricity, heat, or steam a company purchases and uses. By using the energy, an organization is indirectly responsible for the release of GHG emissions.
- Scope 3 includes any other indirect emissions from sources outside of a company’s direct control. The GHG Protocol’s Scope 3 Standard categorizes emissions across fifteen different categories covering business activities common to many organizations, including purchased goods and services, business travel, and waste in operations. The rule also encompasses activities like leased assets, transport and distribution, the use and disposal of sold products, and the impact of any investments.
Scope 3, in other words, is a very big deal. And it will affect just about every company we students of the industry might care to invest in.
Anyone know the effects?
To date, GHG reporting has been shaped by voluntary standards, frameworks, and ratings designed to help companies measure progress and achieve sustainability goals. But as regulators in the U.S. and the EU begin requiring climate-related disclosures like Scope 3, all of this will move quickly from voluntary to more standardized and regulated requirements.
From where we sit, 2024 is shaping up to be a defining moment for GHG reporting that is central to evolving regulation. Savvy companies will begin setting a broad strategy and refine their approach as data improves. GHG emissions data and reporting methodologies continue to evolve, and in some cases do not yet exist.
It’s reasonable to think that effective corporate leaders and finance teams will recognize that measuring and disclosing GHG emissions is a practical business challenge, maybe even a significant business opportunity. In our view, leading companies that respond to the challenge of Scope 3 will go a long way toward maximizing long-term value for shareholders. For our part, we’re working towards identifying them.
https://www.nasdaq.com/articles/business-needs-to-wake-up-to-the-reality-of-ghg-emissions-reporting
Important Information
Fund information is not intended to represent future portfolio composition. Portfolio holdings are subject to change and should not be considered a recommendation to buy individual securities. The Fund is subject to several risks, any of which could cause the Fund to lose money. These risks, which are described more fully in the prospectus, include stock market risk, economic and political events risks, sector risks, large and medium sized company risks and value investing risks.
The portfolio’s environmental focus may limit investment options available to the Fund and may result in lower returns than returns of funds not subject to such investment considerations. There are no assurances that the Fund will achieve its objective and or strategy. Investing in securities of small and medium sized companies, even indirectly, may involve greater volatility than investment in larger and more established companies.
Investors should consider the Fund’s investment objectives, risks, charges and expenses carefully before investing. The prospectus contains this and other information about the Fund. A prospectus should be read carefully before investing.
As of October 10, 2022, Green Alpha advisors will no longer serve as sub-advisor to the Fund. As of October 10, 2022, Bruce Kahn will serve as lead portfolio manager of the Fund.
Effective December 20, 2022, the fund changed its name from Shelton Green Alpha Fund to Shelton Sustainable Equity Fund.
Shelton Funds are distributed by RFS Partners, a member of FINRA and affiliate of Shelton Capital Management.
INVESTMENTS ARE NOT FDIC INSURED OR BANK GUARANTEED AND MAY LOSE VALUE.
By clicking the above link, you’ll leave this site and go to a third-party website. Shelton Capital Management does not control the content or privacy practices of the other website and does not endorse or accept responsibility for the content, policies, activities, products or services offered on the site. It should not be considered investment advice. The information provided does not provide information reasonably sufficient upon which to base an investment decision and should not be considered a recommendation to purchase or sell any particular security.
