OUR RESPONSE TO THE SECURITIES AND EXCHANGE COMMISSION’S PROPOSED RULES ON CLIMATE CHANGE

In March of 2022, the Securities and Exchange Commission (SEC) – the federal agency created to protect investors, and maintain fair, orderly, and efficient markets – released a proposed rule for public comment that clarifies and sets expectations for how publicly traded companies report on climate change related issues.  The International Living Future Institute has submitted formal comments to the SEC expressing our support, and providing recommendations for strengthening the proposed rules. We’ve provided a link to our full comments here, and we encourage our community to submit your own comments.

Behind every Certified and Registered Living Building is an investor.  

Someone, or multiple people and organizations, investing their money and their time into demonstrating what good looks like.  Whether it’s a bank making a loan, a Real Estate Investment Trust (REIT), a corporate investment, or a university investing from an endowment, these investors know that what they are investing in is much bigger than the single building.  They are investing in the ideas and philosophies of a Living Future as much as they are investing in a physical asset.  But they are investing in the asset, and increasingly, investors are asking and being asked; what sustainability criteria do you use to determine where you invest?  Do you have carbon reduction targets?  Do you report out on your sustainability goals and progress?  How do you manage climate change risks to your company?

The financial sector is paying attention to climate change.

Aside from the obvious connection between this proposed rule and climate change impacts, ILFI is particularly interested in this development for multiple reasons.  First, there are already a number of publicly traded companies that have invested in Registered and Certified Living, Zero Energy, and Zero Carbon buildings including Google (GOOGL), Amazon (AMZN), Etsy (ETSY), PNC (PNC), Mohawk (MHK), Target (TGT), and many more.  These companies will be subject to the new proposed rules, and we are working to ensure that ILFI’s certifications remain aligned with other corporate reporting standards.  Second, because of ILFI’s experience with rule-making about reporting, and transparency, we have a unique perspective to add to the discussion of how the SEC can best position their reporting frameworks to be effective and meaningful.

For our community, this new rule marks a unique moment when “the money people” have started to ask the questions we’ve been answering for decades – how do we ensure companies are taking meaningful action on climate change?  What is the best way to provide transparency and accountability around those actions?  As our community engages with more and more companies, banks, investors, and REITs, we collectively have one more way to engage them in a discussion about why they should build a Zero Carbon, Zero Energy, or a Living Building; because ILFI certification provides third-party validation of their progress toward their corporate goals in alignment with SEC reporting standards.

ILFI’s comments and recommendations

You can read ILFI’s full response to the SEC Proposed Rule for the Enhancement of Climate-Related Disclosures for Investors here. In summary, we are pleased to see the SEC establish these rules, that they are aligned with existing industry adopted frameworks like the GHG Protocol, and that they are prioritizing measured actual reporting over predictive reporting.  In addition to our comments, you can read comments from other aligned organizations such as ULI, USGBC, CERES, and the WWF.

However, the rules are currently focused only on a single attribute of carbon and climate change related resilience risks, and do not currently address the holistic nature of these issues including human health, or social justice and equity.  ILFI has encouraged the SEC to expand their consideration of future rule-making to include a more holistic approach for reporting on the full range of sustainability measures and impacts that companies are achieving through ILFI Certifications.

Moving forward

The proposed rule from the SEC is a positive signal to large publicly traded companies that addressing climate change risks, and setting and tracking carbon reduction targets, are important for their businesses to address.  The attention that is being given to issues of sustainability reporting from the investor community is also a positive signal, and makes it clear that the green building movement’s approach of voluntary certification of leading organizations while advocating for increased minimum requirements from codes and regulations is working.  

As more and more companies and investors ask for clarity about company carbon targets, the ability of our community to deliver projects that not only align with corporate goals and eliminate carbon emissions, but that are also third-party validated in alignment with SEC reporting requirements will become a driving factor to achieving a Living Future.

The SEC is accepting additional public comment through June 17, 2022.

Written By

Shawn Fisher Hesse

Shawn is a licensed architect, and prior to joining ILFI, led the Boston office of emersion DESIGN, an architecture and sustainability consulting firm. Shawn has over 13 years of project experience with LEED, the Living Building Challenge, and net zero energy projects, and has consulted with Fortune 500 companies and policy makers at all levels of government on issues related to the Living Building Challenge, LEED, net zero building, green building policies, and green jobs. As a trained facilitator, adjunct professor, and Living Building Challenge Ambassador, he has educated more than 5,000 people on issues related to sustainability, high performance building, and social justice in the built environment. As a volunteer, he has led the Living Future Collaborative and USGBC Chapter in Boston, and currently serves on the LEED Social Equity Working Group with USGBC. Shawn is also on the national board of Architects/Designers/Planners for Social Responsibility, working to promote human rights through design.