ABA Letter to DOD, GSA and NASA on Federal Climate Disclosures

Department of Defense
General Services Administration
National Aeronautics and Space Administration

To whom it may concern:

The American Bankers Association appreciates the opportunity to comment on FAR Case 2021-015 – Federal Acquisition Regulation Disclosure of Greenhouse Gas Emissions and Climate-related Financial Risk (The Proposed Rule). The Proposed Rule requires certain Federal contractors to disclose their greenhouse gas emissions and climate-related financial risks, as well as set science-based targets to reduce their greenhouse gas emissions.

Given the potential significance that The Proposed Rule can have across the economy, ABA believes that significant and fundamental clarifications and changes are necessary before the rule is finalized. As written, we believe The Proposed Rule:

1. May place burdensome and onerous requirements on businesses far beyond what is intended by the agencies. Regardless of inclusion within the Federal contractor System for Award Management (SAM system), regulated banks of all sizes may be considered Federal contractors (or could be considered as such in the future). Further, other organizations that are value chain partners of Federal Contractors – even those specifically listed as exempt in The Proposed Rule –will be required to perform significant work to support such Federal Contractor disclosures.
   
   
2. Hands practical regulatory powers to non-governmental organizations (NGOs). Notwithstanding questions related to the constitutionality of such an action, the delegation of duties is being executed without a stringent process (both initially and ongoing) to assess regulatory needs as well as the suitability of these organizations, their procedures, and their standards and guidance as standard setters for US businesses.
   
   
3. Will confuse investors that will be receiving information from publicly-held companies (based on registrant disclosures in accordance with an expected final rule on climate disclosure from the Securities and Exchange Commission (SEC)) as well as government contracting managers that must reconcile how such disclosures apply to their supply chains.
   
   
4. Misunderstands the practical use of Scope 3 financed emission measurements.
   • Scope 3 financed emissions are often misleading indicators of climate-related financial transition risk. In many cases, especially when related to financed emissions within a company's investment portfolio, Scope 3 GHGs are merely indicative of the size of the organization or its respective borrowers.
   • Scope 3 financed emissions measurements are often subject to widely-acknowledged challenges of double- and triple-counting within an investment portfolio or across multiple investment portfolios.
     • In the first case, the measured financed emissions in an energy loan may also be included within the financed emissions of an auto parts manufacturer (that uses the energy), which may be financed by the same bank.
     • Alternatively, financed emissions related to the energy loan could be included within the financed emissions of a different lender if the auto parts manufacturer loan is held by a separate institution.
       
       As a result, financed emissions are often of little use in understanding the challenges of supply chain management or in reducing GHGs within specific investment portfolios.
   • Scope 3 GHG measurements (as a whole as well as financed emissions measurements) are dependent on the ultimate use and disposal of the related products and services, which will normally be controlled by the Federal contracting agency or by Congress. In other words, the Federal contractor often has little practical ability to manage value chain (Scope 3) GHGs.
     
     
5. Significantly underestimates the costs of compliance, as estimated costs appear to be based on feedback received in response to the SEC's 2021 Request For Information (RFI). In addition to those costs of (non-Federal contractor) value chain partners, various aspects of internal controls (including auditing, model validation, and tests of relevance and reliability) have historically not been recognized as a part of most GHG measurement processes suitable for required public disclosure. These costs are likely not taken into account.

The Proposed Rule is also being developed in parallel to a similar and extensive regulation by the Securities and Exchange Commission (SEC), which will cover all public companies, and in some cases, private companies.

Download the comment letter to read the full text.