Structured Finance Association Provides Recommendations on ABS Climate Disclosures in Letter to SEC

Tailored climate disclosure for ABS required; SFA developing securitization framework 

Today, the Structured Finance Association (SFA) submitted a letter to the U.S. Securities and Exchange Commission (SEC) in response to the SEC’s proposed rule “The Enhancement and Standardization of Climate-Related Disclosures for Investors” (the “Proposed Rule”). The letter recommends that the SEC build off the existing asset-backed securities (ABS) disclosure regime, tailor reporting disclosures by asset class with a focus on providing material information to investors and avoid overly prescriptive requirements.  SFA also cautioned the SEC to avoid disclosure requirements that mandate the reporting of data which is not available or reliable, or which invokes consumer privacy concerns, because it could hinder public ABS issuance.

The letter can be viewed here.

The SFA thanked the SEC for exempting the ABS market from current Proposed Rules, a decision that will provide the market, and the necessary climate data, the needed time to develop.

”We share the Commission’s goal of furnishing investors with consistent, comparable, and reliable climate risk disclosures, while recognizing substantial work remains to successfully create and implement such a framework for the securitization market,” said Michael Bright, CEO of the Structured Finance Association. “For this reason, in collaboration with our market-wide membership, SFA has been enthusiastically leading the development of an industry-driven ESG reporting initiative to develop an environmental (as well as social and governance) reporting framework for the securitization market.”

This SFA-led climate disclosure framework is expected to be released in Q1 of 2023 and will provide information and context for how to best approach any future climate-related disclosure rule for public ABS. SFA is committed to working with the SEC and looks forward to sharing its market-build framework with the Commission in the future.