SFA Response to the Securities and Exchange Commission’s Request for Public Input on Climate Change Disclosures

Background:

In March 2021, the Securities and Exchange Commission (SEC) sought public input on climate change disclosures. On June 11, 2021, SFA submitted a letter in collaboration with the SFA ESG Task Force and broader membership. The letter draws distinctions between the securitization market and other markets and suggests a path forward for climate disclosures in our market.

SFA Key Points:

SFA’s response details the consensus viewpoints of SFA market members, noting the following:

1. There is strong and growing interest across structured finance issuers and investors in ESG related issuance as detailed in an SFA survey of market participants.
2. While ESG disclosures—particularly disclosure related to climate change and the environment—have gained traction in recent years, such disclosures in the securitization industry are not yet as widespread as they are in the corporate debt or equities markets.
3. The market has observed a lack of uniformity and standardization of ESG disclosure and reporting. To-date, industry participants have frequently created their own frameworks for establishing, measuring, disclosing, and reporting ESG metrics in securitization.
4. As such, SFA makes the following recommendations to the SEC in its letter:
5. Establish a principles-based approach to the goals of climate disclosure, not mandated disclosure fields.
6. Leverage existing disclosure standards for other markets, where appropriate, while tailoring them to the overall securitization market and to specific asset classes within securitization.
7. Create a phased-in approach for disclosure requirements by fixed income product type since we believe it is premature to scope in securitization issuers given the nascent nature of climate-related securitization issuances In contrast to the corporate debt and equity markets. We further recommend that the SEC allow SFA and the securitization industry an 18–24 month timeframe to develop market consensus disclosure frameworks for securitization.