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The long-delayed risk disclosure regulation is almost here.
A new era of transparency for corporate sustainability is coming — finally. After two years of deliberation, the Securities and Exchange Commission is expected to issue a final rule requiring public companies to make climate-related disclosures to investors. The decision could come as soon as next week.
The rule considers two categories of climate-related information relevant to investors: greenhouse gas emissions and exposure to climate-related risks like extreme weather or future regulations. While many companies voluntarily disclose this kind of information in other ways, the rules will both require and standardize climate-based reporting as a core part of a company’s fiduciary duty.
From almost the moment it appeared, the proposal has been the center of a lobbying firestorm. Some of the rule’s opponents write it off as part of an activist agenda — an indirect route to economy-wide carbon regulations. “The host of new requirements in this Proposed Rule are motivated by a small number of environmental activists who seek to steer the economy away from fossil fuels,” wrote twelve Republican attorneys general in a letter to the SEC responding to the proposal. The U.S. Chamber of Commerce, meanwhile, vowed to fight back against “unlawful and excessive government overreach.” (At a Chamber-sponsored event last October, SEC Chair Gary Gensler joked, “Wait, are you already suing us? I just walked in.”)
Certainly there are environmentalists who do see the rule as a tool to undermine the oil and gas industry. But proponents primarily make the case that the stakes are less about the atmosphere and more about protecting investors and the entirety of the financial system.
While we’re still waiting on the final rule — which was originally expected in the fall of 2022 and has been repeatedly delayed — here’s a catch-up on what we know so far.
At a basic level, the SEC makes rules saying what companies have to disclose and how so that investors can make well-informed decisions. The two types of information this particular rule covers — climate-related risks and greenhouse gas emissions — are distinct, but related.
The former is pretty straightforward. From the growing number of billion-dollar weather- and climate-related disasters in the United States to the ongoing exodus of insurance companies from fire and flood-prone areas to trade delays in the drought-stricken Panama Canal, it’s clear that climate change poses a substantial financial risk to businesses. It makes sense that investors would want to know how exposed a company’s warehouses or data centers or trucking routes are to wildfires and floods.
But why should investors care about a company’s emissions? Because they are an indicator of another type of risk.
“A shareholder is not necessarily concerned with whether a company is ‘on target’ with any climate commitment,” Boston University law professor Madison Condon writes, “but rather in assessing how exposed an asset may be to changes in global or local climate policy, energy prices, or shifts in consumer and investor sentiments.”
These changes are already in motion around the world, and are generally accelerating. Companies that aren’t preparing could be disadvantaged, or alternatively, could miss lucrative opportunities. Steven Rothstein, a managing director at the nonprofit Ceres, gave the example of the steel industry. If you think that, in the next several years, customers are going to ask for low-emission steel — which some already are doing — or that there might be a regulatory cost put on steel-related emissions, then a company with lower emissions will be better positioned to grow, while a company with higher emissions might have to spend a bunch of money to retrofit its factories.
Part of the SEC’s rationale for the rule is the proliferation of investor-led initiatives calling for government-mandated climate risk disclosure. “These initiatives demonstrate that investors are using information about climate risks now as part of their investment selection process and are seeking more informative disclosures about those risks,” the Commission wrote in its proposal. (Oil giant Exxon filed suit against the sponsors of one such proposal in January, having lost patience with proposals it said were “calculated to diminish the company’s existing business.”)
After the draft rule was released in March 2022, the SEC was bombarded by thousands of comments from investors, academics, NGOs, politicians, trade associations, and companies. One analysis of those comments by legal researchers found that investors were the most supportive group, with more than 80% in favor of the rule.
The most contentious aspect of the proposal invited criticism even from parties that were generally supportive of the rule. The SEC had taken a strong stance on emissions reporting, asking companies to disclose emissions indirectly related to their business, known as“scope 3” emissions. That means a company like Amazon wouldn’t just have to report the emissions from its warehouses and delivery trucks, but also an estimate of the emissions associated with producing and using all the products it sells. A company like Ford wouldn’t just have to report the emissions from its factories, but also from the production of the raw materials it uses, as well as from all the gasoline burned in the cars it sells.
Those in support of scope 3 reporting point to the fact that for many companies, including the two I just named, the number would vastly exceed their direct emissions.
In a legal review of why scope 3 emissions reporting matters, Condon warned that without it, companies could begin outsourcing their most emissions-intensive processes to third parties in order to appear greener than they actually are. She also argued that leaving out scope 3 obscures climate risks. She gave the example of electric vehicles, which can involve higher emissions during production than conventional cars but result in much lower emissions over their lifecycle. “When excluding Scope 3, an EV manufacturer is penalized, even though from the perspective of considering transition risk and climate impact, this makes little sense,” she wrote.
But companies and their trade associations threw every excuse at the idea of a scope 3 requirement: It would cost too much to gather the data; the data on supply chain emissions is unreliable and impossible to verify; since companies don’t directly produce these emissions, they aren’t relevant; etc.
And by all accounts, they won. The SEC is expected to drop requirements to report scope 3 emissions in the final rule.
However, that’s unlikely to satisfy opponents, many of whom, like the Republican attorneys generals who wrote letters to the Commission, say the SEC doesn’t have the legal authority to require climate-related disclosures at all. If there’s one thing that critics and supporters agree on, it’s that the rule, whatever it says, is going to be challenged in court.
A lot of companies are going to have to report their scope 3 emissions anyway. The European Union’s Corporate Sustainability Reporting Directive includes scope 3 and is expected to cover more than 50,000 companies, with some starting to report as soon as this year; U.S.-based businesses on EU-regulated exchanges, or with subsidiaries or parent companies in Europe, will be expected to comply. A similar rule voted into law in California last year also requires scope 3 emissions disclosures and covers any company doing business in the state — whether private or public — giving it broader reach than the SEC. However, Governor Gavin Newsom did not include any funding for the law in his budget proposal this year, creating concern that it will be delayed.
Danny Cullenward, a climate economist and legal expert, said the fate of the California regulations are important in light of the likely Supreme Court challenge to the SEC rule. “It's a lot harder to mount comparably broad challenges to state laws on this front,” he told me.
Despite the SEC’s narrow focus on protecting investors, the mandatory disclosure of corporate emissions and climate risks would have widespread effects — even some that regular people might feel. Suddenly, consumers would have better tools to compare the relative sustainability of different companies and products. Activists would have more documentation to hold companies accountable for greenwashing or failing to live up to their public climate commitments.
The rule is also set to spark an explosion in the businesses of corporate emissions accounting and climate risk analysis. Most companies don’t have the staff or expertise to track their emissions, and thus will have to turn either to specialized climate-specific firms like Watershed or all-purpose corporate accountants like Deloitte to manage the disclosure process for them. Similarly, analytics giants like Moodys and S&P Global will also be called upon to feed company data into climate models and spit out risk reports.
Both exercises come with inherent challenges and uncertainties. Climate risk researchers have warned that rating services keep their methodologies in a black box, making it hard to know whether they are using climate models appropriately. “The misuse of climate models risks a range of issues, including maladaptation and heightened vulnerability of business to climate change, an overconfidence in assessments of risk, material misstatement of risk in financial reports, and the creation of greenwash,” wrote the authors of a 2021 article in the journal Nature Climate Change.
“When you ask, ‘What is my exposure to future climate risks?,’ you're asking for a projection of future climate states and probabilities of different future climate outcomes and extreme weather events. There's an enormous amount of scientific uncertainty and complexity in getting to that,” Cullenward told me.
But while neither emissions accounting nor climate risk assessment may be perfectly up to the task yet, Cullenward argued that’s all the more reason for the SEC to get these rules in place.
“If you don't ask people to disclose what's going on, it's just sticking your head in the sand,” he said. “No one will ever know how to do it perfectly, getting out of the gate. To me that is not a reason to stop or to slow down, that is a reason to get started.”
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Give the people what they want — big, family-friendly EVs.
The star of this year’s Los Angeles Auto Show was the Hyundai Ioniq 9, a rounded-off colossus of an EV that puts Hyundai’s signature EV styling on a three-row SUV cavernous enough to carry seven.
I was reminded of two years ago, when Hyundai stole the L.A. show with a different EV: The reveal of Ioniq 6, its “streamliner” aerodynamic sedan that looked like nothing else on the market. By comparison, Ioniq 9 is a little more banal. It’s a crucial vehicle that will occupy the large end of Hyundai's excellent and growing lineup of electric cars, and one that may sell in impressive numbers to large families that want to go electric. Even with all the sleek touches, though, it’s not quite interesting. But it is big, and at this moment in electric vehicles, big is what’s in.
The L.A. show is one the major events on the yearly circuit of car shows, where the car companies traditionally reveal new models for the media and show off their whole lineups of vehicles for the public. Given that California is the EV capital of America, carmakers like to talk up their electric models here.
Hyundai’s brand partner, Kia, debuted a GT performance version of its EV9, adding more horsepower and flashy racing touches to a giant family SUV. Jeep reminded everyone of its upcoming forays into full-size and premium electric SUVs in the form of the Recon and the Wagoneer S. VW trumpeted the ID.Buzz, the long-promised electrified take on the classic VW Microbus that has finally gone on sale in America. The VW is the quirkiest of the lot, but it’s a design we’ve known about since 2017, when the concept version was revealed.
Boring isn’t the worst thing in the world. It can be a sign of a maturing industry. At auto shows of old, long before this current EV revolution, car companies would bring exotic, sci-fi concept cars to dial up the intrigue compared to the bread-and-butter, conservatively styled vehicles that actually made them gobs of money. During the early EV years, electrics were the shiny thing to show off at the car show. Now, something of the old dynamic has come to the electric sector.
Acura and Chrysler brought wild concepts to Los Angeles that were meant to signify the direction of their EVs to come. But most of the EVs in production looked far more familiar. Beyond the new hulking models from Hyundai and Kia, much of what’s on offer includes long-standing models, but in EV (Chevy Equinox and Blazer) or plug-in hybrid (Jeep Grand Cherokee and Wrangler) configurations. One of the most “interesting” EVs on the show floor was the Cybertruck, which sat quietly in a barely-staffed display of Tesla vehicles. (Elon Musk reveals his projects at separate Tesla events, a strategy more carmakers have begun to steal as a way to avoid sharing the spotlight at a car show.)
The other reason boring isn’t bad: It’s what the people want. The majority of drivers don’t buy an exotic, fun vehicle. They buy a handsome, spacious car they can afford. That last part, of course, is where the problem kicks in.
We don’t yet know the price of the Ioniq 9, but it’s likely to be in the neighborhood of Kia’s three-row electric, the EV9, which starts in the mid-$50,000s and can rise steeply from there. Stellantis’ forthcoming push into the EV market will start with not only pricey premium Jeep SUVs, but also some fun, though relatively expensive, vehicles like the heralded Ramcharger extended-range EV truck and the Dodge Charger Daytona, an attempt to apply machismo-oozing, alpha-male muscle-car marketing to an electric vehicle.
You can see the rationale. It costs a lot to build a battery big enough to power a big EV, so they’re going to be priced higher. Helpfully for the car brands, Americans have proven they will pay a premium for size and power. That’s not to say we’re entering an era of nothing but bloated EV battleships. Models such as the overpowered electric Dodge Charger and Kia EV9 GT will reveal the appetite for performance EVs. Smaller models like the revived Chevy Bolt and Kia’s EV3, already on sale overseas, are coming to America, tax credit or not.
The question for the legacy car companies is where to go from here. It takes years to bring a vehicle from idea to production, so the models on offer today were conceived in a time when big federal support for EVs was in place to buoy the industry through its transition. Now, though, the automakers have some clear uncertainty about what to say.
Chevy, having revealed new electrics like the Equinox EV elsewhere, did not hold a media conference at the L.A. show. Ford, which is having a hellacious time losing money on its EVs, used its time to talk up combustion vehicles including a new version of the palatial Expedition, one of the oversized gas-guzzlers that defined the first SUV craze of the 1990s.
If it’s true that the death of federal subsidies will send EV sales into a slump, we may see messaging from Detroit and elsewhere that feels decidedly retro, with very profitable combustion front-and-center and the all-electric future suddenly less of a talking point. Whatever happens at the federal level, EVs aren’t going away. But as they become a core part of the car business, they are going to get less exciting.
Current conditions: Parts of southwest France that were freezing last week are now experiencing record high temperatures • Forecasters are monitoring a storm system that could become Australia’s first named tropical cyclone of this season • The Colorado Rockies could get several feet of snow today and tomorrow.
This year’s Atlantic hurricane season caused an estimated $500 billion in damage and economic losses, according to AccuWeather. “For perspective, this would equate to nearly 2% of the nation’s gross domestic product,” said AccuWeather Chief Meteorologist Jon Porter. The figure accounts for long-term economic impacts including job losses, medical costs, drops in tourism, and recovery expenses. “The combination of extremely warm water temperatures, a shift toward a La Niña pattern and favorable conditions for development created the perfect storm for what AccuWeather experts called ‘a supercharged hurricane season,’” said AccuWeather lead hurricane expert Alex DaSilva. “This was an exceptionally powerful and destructive year for hurricanes in America, despite an unusual and historic lull during the climatological peak of the season.”
AccuWeather
This year’s hurricane season produced 18 named storms and 11 hurricanes. Five hurricanes made landfall, two of which were major storms. According to NOAA, an “average” season produces 14 named storms, seven hurricanes, and three major hurricanes. The season comes to an end on November 30.
California Gov. Gavin Newsom announced yesterday that if President-elect Donald Trump scraps the $7,500 EV tax credit, California will consider reviving its Clean Vehicle Rebate Program. The CVRP ran from 2010 to 2023 and helped fund nearly 600,000 EV purchases by offering rebates that started at $5,000 and increased to $7,500. But the program as it is now would exclude Tesla’s vehicles, because it is aimed at encouraging market competition, and Tesla already has a large share of the California market. Tesla CEO Elon Musk, who has cozied up to Trump, called California’s potential exclusion of Tesla “insane,” though he has said he’s okay with Trump nixing the federal subsidies. Newsom would need to go through the State Legislature to revive the program.
President-elect Donald Trump said yesterday he would impose steep new tariffs on all goods imported from China, Canada, and Mexico on day one of his presidency in a bid to stop “drugs” and “illegal aliens” from entering the United States. Specifically, Trump threatened Canada and Mexico each with a 25% tariff, and China with a 10% hike on existing levies. Such moves against three key U.S. trade partners would have major ramifications across many sectors, including the auto industry. Many car companies import vehicles and parts from plants in Mexico. The Canadian government responded with a statement reminding everyone that “Canada is essential to U.S. domestic energy supply, and last year 60% of U.S. crude oil imports originated in Canada.” Tariffs would be paid by U.S. companies buying the imported goods, and those costs would likely trickle down to consumers.
Amazon workers across the world plan to begin striking and protesting on Black Friday “to demand justice, fairness, and accountability” from the online retail giant. The protests are organized by the UNI Global Union’s Make Amazon Pay Campaign, which calls for better working conditions for employees and a commitment to “real environmental sustainability.” Workers in more than 20 countries including the U.S. are expected to join the protests, which will continue through Cyber Monday. Amazon’s carbon emissions last year totalled 68.8 million metric tons. That’s about 3% below 2022 levels, but more than 30% above 2019 levels.
Researchers from MIT have developed an AI tool called the “Earth Intelligence Engine” that can simulate realistic satellite images to show people what an area would look like if flooded by extreme weather. “Visualizing the potential impacts of a hurricane on people’s homes before it hits can help residents prepare and decide whether to evacuate,” wrote Jennifer Chu at MIT News. The team found that AI alone tended to “hallucinate,” generating images of flooding in areas that aren’t actually susceptible to a deluge. But when combined with a science-backed flood model, the tool became more accurate. “One of the biggest challenges is encouraging people to evacuate when they are at risk,” said MIT’s Björn Lütjens, who led the research. “Maybe this could be another visualization to help increase that readiness.” The tool is still in development and is available online. Here is an image it generated of flooding in Texas:
Maxar Open Data Program via Gupta et al., CVPR Workshop Proceedings. Lütjens et al., IEEE TGRS
A new installation at the Centre Pompidou in Paris lets visitors listen to the sounds of endangered and extinct animals – along with the voice of the artist behind the piece, the one and only Björk.
How Hurricane Helene is still putting the Southeast at risk.
Less than two months after Hurricane Helene cut a historically devastating course up into the southeastern U.S. from Florida’s Big Bend, drenching a wide swath of states with 20 trillion gallons of rainfall in just five days, experts are warning of another potential threat. The National Interagency Fire Center’s forecast of fire-risk conditions for the coming months has the footprint of Helene highlighted in red, with the heightened concern stretching into the new year.
While the flip from intense precipitation to wildfire warnings might seem strange, experts say it speaks to the weather whiplash we’re now seeing regularly. “What we expect from climate change is this layering of weather extremes creating really dangerous situations,” Robert Scheller, a professor of forestry and environmental resources at North Carolina State University, explained to me.
Scheuller said North Carolina had been experiencing drought conditions early in the year, followed by intense rain leading up to Helene’s landfall. Then it went dry again — according to the U.S. Drought Monitor, much of the state was back to some level of drought condition as of mid-November. The NIFC forecast report says the same is true for much of the region, including Florida, despite its having been hit by Hurricane Milton soon after Helene.
That dryness is a particular concern due to the amount of debris left in Helene’s wake — another major risk factor for fire. The storm’s winds, which reached more than 100 miles per hour in some areas, wreaked havoc on millions of acres of forested land. In North Carolina alone, the state’s Forest Service estimates over 820,000 acres of timberland were damaged.
“When you have a catastrophic storm like [Helene], all of the stuff that was standing upright — your trees — they might be snapped off or blown over,” fire ecologist David Godwin told me. “All of a sudden, that material is now on the forest floor, and so you have a really tremendous rearrangement of the fuels and the vegetation within ecosystems that can change the dynamics of how fire behaves in those sites.”
Godwin is the director of the Southern Fire Exchange for the University of Florida, a program that connects wildland firefighters, prescribed burners, and natural resources managers across the Southeast with fire science and tools. He says the Southeast sees frequent, unplanned fires, but that active ecosystem management helps keep the fires that do spark from becoming conflagrations. But an increase like this in fallen or dead vegetation — what Godwin refers to as fire “fuel” — can take this risk to the next level, particularly as it dries out.
Godwin offered an example from another storm, 2018’s Hurricane Michael, which rapidly intensified before making landfall in Northern Florida and continuing inland, similar to Hurricane Helene. In its aftermath, there was a 10-fold increase in the amount of fuel on the ground, with 72 million tons of timber damaged in Florida. Three years later, the Bertha Swamp Road Fire filled the storm’s Florida footprint with flames, which consumed more than 30,000 acres filled with dried out forest fuel. One Florida official called the wildfire the “ghost” of Michael, nodding to the overlap of the impacted areas and speaking to the environmental threat the storm posed even years later.
Not only does this fuel increase the risk of fire, it changes the character of the fires that do ignite, Godwin said. Given ample ground fuel, flame lengths can grow longer, allowing them to burn higher into the canopy. That’s why people setting prescribed fires will take steps like raking leaf piles, which helps keep the fire intensity low.
These fires can also produce more smoke, Godwin said, which can mix with the mountainous fog in the region to deadly effect. According to the NIFC, mountainous areas incurred the most damage from Helene, not only due to downed vegetation, but also because of “washed out roads and trails” and “slope destabilization” from the winds and rain. If there is a fire in these areas, all these factors will also make it more challenging for firefighters to address it, the report adds.
In addition to the natural debris fire experts worry about, Helene caused extensive damage to the built environment, wrecking homes, businesses, and other infrastructure. Try imagining four-and-a-half football fields stacked 10 feet tall with debris — that’s what officials have removed so far just in Asheville, North Carolina. In Florida’s Treasure Island, there were piles 50 feet high of assorted scrap materials. Officials have warned that some common household items, such as the lithium-ion batteries used in e-bikes and electric vehicles, can be particularly flammable after exposure to floodwaters. They are also advising against burning debris as a means of managing it due to all the compounding risks.
Larry Pierson, deputy chief of the Swannanoa Fire Department in North Carolina, told Blueridge Public Radio that his department’s work has “grown exponentially since the storm.” While cooler, wetter winter weather could offer some relief, Scheuller said the area will likely see heightened fire behavior for years after the storm, particularly if the swings between particularly wet and particularly dry periods continue.
Part of the challenge moving forward, then, is to find ways to mitigate risk on this now-hazardous terrain. For homeowners, that might mean exercising caution when dealing with debris and considering wildfire risk as part of rebuilding plans, particularly in more wooded areas. On a larger forest management scale, this means prioritizing safe debris collection and finding ways to continue the practice of prescribed burns, which are utilized more in the Southeast than in any other U.S. region. Without focused mitigation efforts, Godwin told me the area’s overall fire outlook would be much different.
“We would have a really big wildfire issue,” he said, “perhaps even bigger than what we might see in parts of the West.”