“Our core bargain from the 1930s is that investors get
to decide which risks to take, as long as public companies provide full and fair disclosure and are
truthful in those disclosures. 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, and investors need reliable information about climate risks to make
informed investment decisions.”
- SEC Chair, Gary
Gensler
The SEC recently unveiled its landmark proposal requiring companies to disclose a variety of climate-related
data as part of their annual reports and audited financial statements in the coming years. This rule would apply
to both domestic and foreign
public companies.
The requirements cover both quantitative and qualitative information. RPIA has been a supporter of both types of
disclosures as we recognize that greenhouse gas emissions (GHG) data is backward-looking and does not always capture
the steps companies are taking to reduce their GHG footprints. Quantitative disclosures will include Scope 1 and 2
emissions data and Scope 3 data if considered material for the company or if the company has set a reduction target
related to Scope 3. Qualitative disclosures include many of the discussion points included in the TCFD framework.
We see this as an important step in the codifying of climate-related risks, echoing the regulatory regimes
already in place in the Eurozone. The proposed disclosures will:
- Help improve the quality and comparability of a company’s climate-related
disclosures, which will benefit the integration of climate-related risks and opportunities into
the market pricing of cost of capital and risk premiums.
- Include details on any climate targets and goals set by the company, which we believe is
an important inclusion that can help bring further scrutiny to the level of validity and ambition within
corporate targets.
- Provide better transparency on the use of carbon offsets and renewable energy
certificates and their role in a company’s reduction and net-zero claims.
Finally, the SEC proposal leads to similar discussions currently happening in Canada and will help pressure
Canadian regulators to adopt a similar disclosure requirement.
Important Information
The information herein is presented by RP Investment Advisors LP (“RPIA”) and is for
informational purposes only. It does not provide financial, legal, accounting, tax, investment, or other advice and
should not be acted upon or relied upon in that regard without seeking the appropriate professional advice. The
information is drawn from sources believed to be reliable, but the accuracy or completeness of the information is
not guaranteed, nor in providing it does RPIA assume any responsibility or liability whatsoever. The information
provided may be subject to change and RPIA does not undertake any obligation to communicate revisions or updates to
the information presented. “Forward-Looking” statements are based on assumptions made by RPIA regarding
its opinion and investment strategies in certain market conditions and are subject to a number of mitigating
factors. Economic and market conditions may change, which may materially impact actual future events and as a result
RPIA’s views, the success of RPIA’s intended strategies as well as its actual course of conduct.
RPIA aims to consider ESG factors as part of our overall investment process, but the weight and importance of it can vary across the investment funds we manage. Always refer to the relevant fund offering documents for important information on the investment objectives, strategies and associated risks of a particular fund. The consideration of ESG factors in the investment process for RP Strategic Income Plus Fund and RP Alternative Global Bond Fund plays a limited role and is weighted less than the core financial and credit analysis employed in the management of these funds.
For more information, visit www.rpia.ca/esg.