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.”

SFA recommended 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 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.

SFA shares the SEC’s goal of furnishing investors with material, comparable, and reliable climate risk disclosure.  However, substantial work remains in order to successfully create and implement such a framework for the securitization market.  For this reason, SFA established an ESG reporting initiative to proactively work through our industry-wide membership and consensus-driven governance to develop an environmental (as well as social and governance) disclosure and 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.