Climate data reporting costs investors $1.3m a year

Climate data reporting

Climate data reporting by US investors costs around $1.3 million annually according to a survey by the SustainAbility Institute.

Climate data reporting by financial markets is essential as business and industry moves to a net zero future and institutional investors are spending an average of $1,372,000 annually to collect, analyse, and report climate data to inform their investment decisions.

The survey conducted by the SustainAbility Institute by ERM for Ceres and Persefoni sought to identify what private sector organizations in the US are currently spending on measuring and managing key climate change data and disclosure activities.

In addition to climate data reporting costs to investors, the survey found that on average corporate issuers are spending $533,000 annually on climate-related disclosure.

The ERM survey provides insight into what issuers currently spend on climate-related disclosure activities that would be required under the SEC’s proposed rules. Its assessment of current average annual issuer costs is similar to the SEC’s estimate of $530,000 in annual issuer costs after the first year of implementation.

Along with discussions of climate data reporting costs, the survey asked respondents to rate the potential benefits of climate-related disclosures and impact assessments. For issuer respondents, the highest ranked benefit was better performance in meeting sustainability, climate, ESG, and SDG goals, followed by better access to data capable of enhancing corporate strategy. Some issuers also cited ‘lower cost of capital’ as a benefit, and a correlation was found between spending more on overall climate-related disclosure and recognizing a lower cost of capital.

For investor respondents, the highest ranked benefit was meeting client demand for climate disclosures and related products, followed by better performance in meeting sustainability, climate, ESG, and SDG goals.

“The U.S. is entering a new era of climate change reporting, driven by the need for clear and consistent data that will help investors to assess and compare organizations’ financial exposure and risk management strategies during the transition to a decarbonised economy,” said Mark Lee, director of the SustainAbility Institute.

The three largest cost categories for businesses are:

Greenhouse gas (GHG) analysis and/or disclosures ($237,000 average annual cost for those reporting spend in this category).

Climate scenario analysis and/or disclosure ($154,000 average annual cost for those reporting spend in this category).

Internal climate risk management controls, namely the costs related to integrating climate risk into business processes ($148,000 average annual cost for those reporting spend in this category).

The three largest cost categories among investor respondents are:

External ESG ratings, data providers, and consultants ($487,000 average annual cost for those reporting spend in this category).

In-house, outside counsel, and proxy solicitor analysis of shareholder voting for ballot items related to gathering climate risk management information ($405,000 average annual cost for those reporting spend in this category).

Internal climate-related investment analysis ($357,000 average annual cost for those reporting spend in this category).

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