The UN-convened Net-Zero Asset Owner Alliance (NZAOA or Alliance), a group of 73 leading pension funds and insurance companies with $10.6 trillion in assets, supports and strongly welcomes the proposed climate disclosure rules by the US Securities and Exchange Commission (SEC or Commission).

NZAOA members have publicly committed to decarbonising their investment portfolios in line with a 1.5°C pathway, and to reach net-zero greenhouse gas emissions by 2050.  Alliance members have also committed to publish science-based intermediate targets for portfolio emission reductions—set using NZAOA’s Target Setting Protocol—and to report on progress on those targets. A key aspect of this commitment is tracking emissions attributable to our portfolio holdings and supporting the reduction of carbon emissions in the real economy.

Within the NZAOA’s Target Setting Protocol (p. 22), we identify that the “limited availability of reliable data is a key issue which provides for asymmetrical information and challenges for investment decision making.” Without transparent, reliable and standardized climate related disclosures, we are unable to make prudent investment decisions and effectively design portfolio strategies to the extent we find reasonable as institutional investors. This is why, we welcome and support, the SEC’s proposed rules.

We believe that one of the most effective remedies for the lack of data availability is to strengthen mandatory regulatory disclosure requirements for corporate emissions. Furthermore, we are of the conviction that the SEC’s set of proposed rules would significantly improve the climate data quality and availability for US-domiciled companies.

In particular, NZAOA members wish to highlight:

1. Our support for the proposed SEC rules, notably the requirement to report on scope 1, 2 emissions and, where material, scope 3.

This is necessary information for investors to make effective portfolio strategy decisions. Furthermore, in order for our in-house and external asset managers to align with our long-term interests and targets, they need reliable, consistent, and standardised data for effective comparison across portfolios and activities. We welcome the provisions regarding disclosure of climate-related risks, climate targets, scenario analysis and company transition plan reporting. A step change in the availability of this information is critical for helping companies and investors assess and manage financial and business risks and opportunities from climate change. The NZAOA agrees with the Commission’s proposal to have the same transition periods for Scope 1 and 2 emissions, with a transition from limited to reasonable assurance

2. At present, US company disclosure of these financially material emissions performance is limited,  inconsistent, incomparable, or a mix of all three.

This situation increases costs for investors in terms of i) direct costs of sourcing providers of this information to estimate or consolidate data into a usable form, ii) stewardship decision costs that are burdensome for both companies and investors (like direct company engagement to understand and interpret data to inform voting and steering activities), and iii) opportunity costs from asset owners invested in the US financial markets that make potentially suboptimal allocation decisions because of the lack of consistent and reliable data.

Moreover, the SEC’s consideration should examine cost and benefit beyond the organizational level and should analyse impacts on the US economy more broadly – including the costs of inaction on climate risk disclosure. Climate change is already having a financial impact in the U.S., and in the past decade extreme weather events in the U.S. have cost $800 billion[1] in disaster-related damages. This is a risk factor that will grow over time, threatening the long-term health of investment portfolios. Therefore, the boundary of analysis for the cost and benefits for this ruling should consider both the organizational and economy-wide impacts. Particularly when considering the broader economic costs of failure to disclose and manage climate-related risks, implementing this proposed ruling would be consistent with the SEC’s mandate to “protect investors [and] maintain fair, orderly and efficient markets”.

The proposed disclosure rules would promote more efficient use of stewardship resources in the capital markets and have a positive impact on investor protection in relation to climate risk. The engagement track of the Alliance, recently released a paper titled The Future of Investor Engagement which identifies one of the current limits of corporate engagement as the “inefficiencies of focusing on voluntary, company by company disclosure”—acknowledging that such engagements can add limited value and are also often not the best use of investor’s limited engagement and stewardship resources (p. 15). Instead, the Alliance suggests that regulatory requirements for material climate-related disclosures will enable more efficient capital markets and that this increase in efficiencies of market disclosure “frees investor and company resources to focus corporate engagements on more strategic topics” (p. 24).

3. While the AOA supports the proposed climate risk disclosure rules, we also need and encourage the SEC to go further.

The SEC notably should require the disclosure of companies’:

  • forward looking decarbonisation pathways for scope 1, 2 emissions and, where material, scope 3;
  • Reporting on material scope 3 emissions separated by upstream/downstream; also separated by GHG; and split of emissions in estimated/measured/assured;
  • degree of alignment of the company’s business model and investment plans with a Paris-compliant 1.5°C scenario.

This would enable AOA members to chart their pathways and investment decisions.

Multiple NZAOA investor members and the Principles for Responsible Investment (PRI have submitted additional responses to the SEC consultation, which provides further details on the points set out above.


[1]. NOAA (8 January 2020) 2010-2019: A landmark decade of U.S. billion-dollar weather and climate disasters. Accessible here:

About the UN-convened Net-Zero Asset Owner Alliance

The 73 members of the UN-convened Net-Zero Asset Owner Alliance have committed i) to transitioning their investment portfolios to net-zero GHG emissions by 2050 consistent with a maximum temperature rise of 1.5°C above pre-industrial levels; ii) to establishing intermediate targets every five years; and iii) to regularly reporting on progress. The Alliance is convened by UNEP’s Finance Initiative and the Principles for Responsible Investment (PRI). The Alliance is supported by WWF and Global Optimism. Further information on the AOA can be found here