Earlier this spring, the Securities and Exchange Commission (SEC) released a proposed rule aimed at strengthening climate-related disclosure requirements for businesses. The rule is designed to give investors greater insight into the risks posed by climate change to businesses, as well as their greenhouse gas (GHG) footprints. As the SEC Chair Gary Gensler put it, “Today, investors representing literally tens of trillions of dollars support climate-related disclosures because they recognize that climate risks can pose significant financial risks to companies.”
The proposed rule is a landmark step for the SEC, but it comes up short in several critical ways. First and foremost, it requires companies to use outdated emission calculation techniques in lieu of measuring emissions in their disclosures. The clear scientific consensus is this is an enormous missed opportunity, as reported emissions and measured emissions often differ widely.
Kairos Aerospace joined with a coalition of methane measurement companies, representing continuous, drone-based, aircraft-based, and satellite methane measurement technologies, to urge the SEC to better account for the ability to measure GHG emissions in its proposed rule. The currently proposed rule relies heavily on the Task Force on Climate-Related Financial Disclosures (TCFD) for companies’ obligations to report their GHG emissions. TCFD in turn relies on emission inventory approaches based on engineering calculations.
The major shortcoming with TCFD is that companies can report their GHG emissions to investors without ever needing to measure emissions from all of their operations. Once upon a time, this made sense. Measurement was infeasible or prohibitively expensive. Engineering estimates were our best guess at reality. But those days are long gone, as demonstrated by the extensive capabilities of the methane measurement coalition companies.
Companies like Kairos are measuring hundreds of thousands of sites per year and accurately quantifying emissions. This is critically important, because the more we measure, the more we find that the real world looks nothing like GHG inventories.
If the SEC is going down the path to require emissions disclosure, measurement must be a part of that approach. Otherwise, investors will be left with inaccurate data that lead to flawed decision-making, thereby undermining the entire purpose of the rule. In our comments, we recommend several measurement-based protocols that could be used instead of TCFD, including the OGMP 2.0 Level 5 framework and the Veritas measurement protocol from GTI.
Both of these techniques require accurate measurement of emissions in order to assess methane emissions. Whichever standard the SEC lands on, it must require measurement of GHG where feasible. If we fail to measure emissions, we’ll ultimately fail to properly understand the challenge of how to best reduce GHG emissions.