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Timing and Implementation

5.     The SEC’s proposed implementation timeline is very aggressive and does not grant AHLA members enough time to adequately comply with the Rule’s disclosure requirements. Implementation of the Rule should be delayed for two years.

In its discussion, the SEC includes a sample compliance schedule that assumes a December 2022 effective date.

According to this timeline, large accelerated filers would report on all climate-related risks and Scopes 1 and 2 emissions beginning 2024 for the fiscal year 2023.

This would require those registrants to begin collecting and analyzing data as early as January 2023, depending on when their fiscal year begins, which effectively requires registrants to begin preparing now prior to the publication of the final rule.

Registrants would be required to gather information for years even earlier than 2023 for their financial statement footnote disclosures.

This implementation timeline is very aggressive and fails to adequately account for the scale of this undertaking.

The timeline does not afford registrants the opportunity to sufficiently analyze the Rule and implement the collection and verification processes required for complete and accurate reporting.

In order to satisfy all the disclosure requirements, our members need more time to fully absorb the Rule and establish the internal policies and processes required to comply.

Some of these steps include assembling internal teams and training necessary personnel to administer data collection programs, developing platforms and methodologies for calculating emissions and assessing relevant risks and opportunities, engaging outside counsel and auditing firms for compliance support, and coordinating with third-party owners and operators who control the data but are not otherwise subject to the SEC’s disclosure requirements.

While many of our members have already implemented some of these processes as part of their voluntary climate reporting, the additional layer of liability that attaches to an SEC filing requires additional refinement and further development of internal controls and processes to ensure satisfactory compliance.

Many of our members are in the early stages of developing their broader climate strategy and have yet to establish many of the necessary procedures to comply with the Rule as written. Additionally, many of our members believe that the SEC’s initial compliance cost estimates do not adequately reflect these steps, nor the additional expenses that will inevitably arise during the course of compliance.

Financial budgets for the 2022 calendar year have already been established, which presents challenges to absorbing the substantial cost in 2022 required to implement the procedures and put personnel in place at the start of 2023 to begin collecting data by the reporting deadline.

We, therefore, urge the SEC to delay implementation by at least two years and, assuming a December 2022 effective date, require the first reporting to be due no earlier than 2026.

6.     Requiring the disclosures to be included in a Registrant’s Form 10-K does not allow registrants to collect and verify their GHG emissions in a manner sufficient for an SEC filing and does not align with existing climate reporting timelines. All climate disclosures should be contained in a separate report.

In addition to the aggressive implementation timeline for the Rule itself, registrants would be required to report these disclosures annually as part of their Form 10-K or registration statement.

Most of AHLA’s public members would therefore only have 60 days to collect, validate, and obtain requisite assurances on the required climate risk and emissions data from their prior fiscal year.

This timeline is extremely onerous if not impossible for companies to satisfy.

While the Rule seeks to address this challenge by allowing registrants to estimate any fourth-quarter data if none is reasonably available, this approach does not account for the significant lag in obtaining data, particularly GHG emissions, from their franchisees and third-party management companies, who must initially collect it from utility companies and other third-party vendors.

This lag is particularly acute in the hotel industry as the role of third parties adds an additional layer to the already extensive process of reviewing and verifying emissions figures in a manner sufficient for an SEC filing.

The extent and scope of annual reporting under the current financial disclosure requirements are already challenging and many of our members who rely on third parties to prepare and submit financial information, already use most of the available time within the 60-day period to prepare their Form 10-K. By the SEC’s own estimate, the Rule likely adds more than 3,000 hours of additional reporting burden to an already intense schedule.

The process is time-intensive as it currently exists, and the Rule will unnecessarily add to the time demands and the expense of public reporting on Form 10-K when the same data collection goals can be achieved in subsequent filings.

Further, our members who are currently producing ESG and other climate-related reports generally rely on a mid-year timeframe for producing this data.

The SEC’s reporting schedule would upend this process entirely. Leading global reporting frameworks, such as the CDP relied on by many of our members for their voluntary climate disclosures, generally require reports to be submitted mid-year to provide adequate time for collection and vetting of prior year data.

It has therefore become an industry practice for companies to submit these disclosures and publish their organizations’ sustainability reports in late Q2 or early Q3 for data collected for the company’s previous fiscal year.

This affords companies adequate time to coordinate with third-party contractors and vendors, collect the relevant GHG emissions data and verify the figures to a level they are comfortable publishing in their annual sustainability reports.

By requiring these climate disclosures to be included in the Form 10-K and imposing onerous attestation thresholds, the Rule establishes a compressed reporting timeline that offers registrants no flexibility to file their SEC disclosures in a sufficiently detailed and precise manner that aligns with the climate disclosure processes they have already instituted.

Providing companies with the time required to produce reliable data is the best way to fulfill the Rule’s intent of collecting reliable, consistent, and comparable data for investors.

We, therefore, suggest that the SEC separate these new disclosures from the Form 10-K entirely and instead allow registrants to file a separate climate-specific report 180 days after fiscal year-end. Lastly, whatever disclosures are required should be prospective only, with historic data only being provided based on the first year when reporting under the rule is required.

7.     Imposing additional disclosure requirements triggered by a registrant’s actions will discourage companies from pursuing aggressive climate goals, especially regarding Scope 3 emissions.

Many of the Rule’s disclosure requirements are triggered by a company’s actions. For example, a registrant that has adopted a climate transition plan must disclose a detailed description of that plan as part of its SEC filing.

Similarly, to the extent a company uses scenario analysis to assess the resilience of its business strategy, those analytical tools must be disclosed even though the Rule does not impose any obligation on registrants to conduct such an analysis. In fact, merely setting a climate-related target or goal internally could trigger the need for a company to provide detailed disclosures, which may include confidential business information.

Of most concern, a registrant whose climate-related targets include a Scope 3 component would then be required to report those emissions.

The SEC has acknowledged that companies may set longer-term goals without full knowledge of the path they will take to achieve their target. It is therefore imperative that such goals not be construed as promises or guarantees, nor should they bind companies to additional reporting requirements under the Rule.

Establishing higher reporting thresholds for registrants who have embraced effective new tools and set more aggressive emissions targets likely will discourage those companies from continuing to be forward-leaning on climate issues, particularly in regard to Scope 3 emissions commitments.

Many of our members who have made or are considering making bold climate commitments, such as achieving net-zero emissions, will likely reconsider whether those goals are ultimately in their companies’ best interest given the added burdens of disclosing these activities as part of their official SEC filings.

The SEC has provided reasoning for why these particular disclosures are not required as of right, including the complexity of the information and the “undue burden” such requirements would impose on certain registrants.

We appreciate that the SEC has considered the challenges that many of these requirements present. We do not believe, however, that treating certain companies differently and, in effect, penalizing them for overcoming these challenges and taking voluntary action serves the broader goal of increased transparency and better data for investors.

Nor does this approach serve the ultimate goal of reducing the emissions and overall environmental impact of public companies. We, therefore, urge the SEC to remove disclosure requirements that are specifically tied to a company’s former or current actions and instead allow registrants to furnish this information on a voluntary basis, as a growing number of our members are currently doing.

Rather than incentivizing companies to limit their climate-related commitments, we believe this approach will provide registrants with the security and predictability they need to continue setting ambitious climate goals and refining best practices for assessing and mitigating climate-related risks and opportunities.

FAMARANANA

As noted above, AHLA is committed to collaborating with the SEC to produce a climate disclosure framework that serves investor interests by producing consistent, comparable, and reliable data. In order to achieve the SEC’s goal, the Rule must include practical requirements that are predictable and viable for AHLA members and the broader hospitality industry.

We encourage the SEC to consider the concerns and suggestions we have raised and we look forward to further discussing the Rule.

Sincerely,

Chip Rogers President and CEO

American Hotel and Lodging Association

Momba ny mpanoratra

Avatar ny Juergen T Steinmetz

Juergen T Steinmetz

Juergen Thomas Steinmetz dia niasa tamina indostrian'ny fizahan-tany sy fizahantany hatramin'ny naha-zatovo azy tany Alemana (1977).
Izy no nanorina eTurboNews tamin'ny 1999 ho toy ny gazety an-tserasera voalohany momba ny indostrian'ny fizahan-tany momba ny fizahan-tany.

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