Agricultural Interests Voice Opposition to SEC Climate Disclosure Proposal

The House Committee on Financial Services’ Subcommittee on Oversight and Investigations hosted a hearing on Thursday on the Securities and Exchange Commission’s proposal on climate disclosure.

The proposal would require public companies to disclose material climate-related risks, including physical and transition risk. Physical risk is related to climate disasters and includes droughts, floods and hurricanes. Transition risk are risks with negative effects from the transition away from fossil fuels.

Public issuers would also have to disclose scope 1 and 2 greenhouse gas emissions. Scope 1 emissions are those emitted directly, and scope 2 are indirect emissions from power consumption. Issuers with a climate-related goal must also disclose scope 3 emissions, which are those produced by their supply chain.

Scope 3 disclosure is perhaps the most controversial item, despite it covering only issuers with climate-related goals. It is also the most complicated to calculate, and the proposal permits reasonable estimates.

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Requiring scope 3 disclosures has drawn the ire of the agricultural industry, not because of the public companies in that sector, but because smaller farms supply larger companies that may be subject to scope 3 requirements. Those small farms, in turn, would have to supply that data to their customers, that would be required to disclose the information to investors, a process that could result in significant costs to the farmers.

Representative John Rose, R-Tennessee, said at the hearing that he is “most concerned about how this rule will impact the agricultural industry.” One bill, the Protect Farmers From the SEC Act, sponsored by Senator John Boozman, R-Arkansas, would specifically exempt agricultural firms from any emissions disclosure.

Bill Schultz, the vice president of Schultz Farms Inc. in Michigan, told the subcommittee that the SEC proposal would require farms to hire outside consultants at great cost in order to market their goods to larger firms.

Supporters of the proposal, such as Representative Sean Casten, D-Illinois, argued that sophisticated investors are acutely aware of climate risks, and if they are not disclosed, assets with high climate risk will be offloaded onto less sophisticated investors. Disclosure, Casten said, would help investors discover the true price of assets with high climate risk exposure.

Tags: climate disclosure, Climate Risk, ESG, greenhouse gas, SEC

The Abu Dhabi Investment Authority, the Indonesia Investment Authority and Dutch pension fund provider APG Asset Management are investing in Indonesia’s Trans Java Toll Road.

“As one of the world’s fastest growing economies, Indonesia is developing its infrastructure to support increased industrialization and more efficient supply chains,” Khadem Alremeithi, executive director of the ADIA’s infrastructure department, said in a release. “The Trans Java Toll Road is a key part of these plans. We are pleased to support its development through this platform with INA and APG, which will continue to seek additional opportunities to invest in Indonesia toll roads.”

The investment is the first to come out of a 2021 memorandum of understanding signed by the three institutional investors, along with Canadian pension fund Caisse de dépôt et placement du Québec, that established Indonesia’s first toll road investment platform. The Indonesia Investment Authority, also known as INA, is Indonesia’s sovereign wealth fund, while ADIA is the investment institution that invests funds on behalf of the Government of Abu Dhabi, the capital of the United Arab Emirates.

Under the memorandum, the investors agreed to explore opportunities for joint investments. At the time, they said they expected the investment platform to have an investment capacity of up to approximately $3.75 billion; however, their most recent announcement specified a target of up to $2.75 billion in funding.

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The investment made by APG, the ADIA and the INA will go toward construction of the Kanci-to-Pejagan and Pejagan-to-Pemalang sections of the Trans Java Toll Road, which the INA acquired in September 2022. According to the INA, the two toll road sections are “instrumental in boosting regional connectivity in Indonesia,” adding that the roads have seen traffic volume jump approximately 68% over a five-year period, with daily vehicle numbers rising to 22,206 in 2021 from 13,202 in 2016.

“Infrastructure remains a foundational need for supporting the region’s economic growth and delivers stable, risk-adjusted returns for the benefit of APG’s pension fund clients and their participants,” Hans-Martin Aerts, APG’s head of infrastructure and natural resources, said in a release.