Understanding the SEC’s Proposed Climate Rules: Part 3
Earlier this year, Professor Steve Cohen published a blog post detailing the potential updates that would be made to the Security and Exchange Commission’s (SEC’s) climate disclosure rule, and the ways in which Columbia’s M.S. in Sustainability Management program would adapt to the needs of this rule change by adding three new courses to the program’s elective list. These new courses — “Management of SEC Climate Disclosure Compliance,” “Understanding the SEC Rule: Disclosure Law for Non-Lawyers,” and “Climate Risk & Scenario Analysis” — are being designed to help our students understand the complexities and nuances of what these proposed rules will mean for the future of investing in a more sustainable world.
Sustainability Management (SUMA) staff and faculty have been working alongside professionals to design these courses so that they are as effective as possible. We reached out to the professors of these new courses so that they can share their own experiences as well as what they think the courses will have to offer in the wake of the proposed changes to the SEC guidelines. We are sharing their responses in a series of three blog posts so that you can get to know them better and get a peek at their new courses.
For the third and final part of this series, we spoke with Satyajit Bose, associate director and professor of practice for the SUMA program, about his course, “Climate Risk & Scenario Analysis.” He will be teaching this course with Dong Guo, associate director of the Research Program on Sustainability Policy and Management at Columbia Climate School’s Earth Institute and professor of practice for the M.S. in Sustainability Management.
Satyajit Bose teaches sustainable investing, climate finance, cost benefit analysis and mathematics. His research interests include the value of ESG (environmental, social, and governance) information, carbon pricing, the link between portfolio investment and sustainable development in emerging markets, and the optimal use of environmental performance metrics for long horizon investment choices. He is co-author (along with Dong Guo and Anne Simpson) of The Financial Ecosystem: The Role of Finance in Achieving Sustainability.
What initially motivated you to pursue environmental finance?
I am one of those people who likes to introduce my friends from one walk of life to those from another group. I worked on my dissertation on the economics of climate change about 25 years ago. At the time, very few people in economics or finance were concerned about climate change, but the issue galvanized environmentalists who generally knew nothing about the world of finance. I was curious about the disconnect between the two groups and wanted to learn more about both sides and perhaps think about bringing them together.
What do you think will be the impact of these proposed SEC guidelines for climate disclosures?
The proposed rule is likely to get watered down considerably. Nevertheless, the resulting regulation will significantly broaden the number of companies that devote management attention to the implications of climate change and the related policy response. I find that the more diverse and bottom up the thinking and decision-making about climate (or indeed any other complex challenge), the more robust and appropriate is the response. The SEC guidelines have already ignited a wildfire of discussion around the importance, difficulty and complexity of identifying physical and transition risks, assigning strategic responsibility to the board and management, and the devil in the details of estimating Scope 3 emissions.
What do you think these proposed guidelines signal for the future of investing in a more environmentally conscious world?
The guidelines herald the beginning of deeper analysis of climate damages, cost differentials across mitigation methods, an approach that is more econometrically equipped and geospatially aware, one that accounts for the interactions between food, energy and water, global trade flows and geopolitically catalyzed supply chain bottlenecks.
How will your course help sustainability professionals navigate these proposed guidelines?
For business and finance professionals today, there is very limited training available on the structure of climate damage estimates, the future potential costs of a range of carbon mitigation options, the potential value (quantitatively speaking) of adaptation investments and how these interact with the numerous scenarios constructed around future socio-economic implications of climate change. Many issuers are grappling with identifying and quantifying the specific risks faced by their businesses, how their strategy and operations are likely to be affected and how they might identify synergistic business opportunities. Many are doing this whether or not the SEC pushes them to do so, simply to prepare for global policy responses and supply chain impacts. The course outlines scenario development, risk measurement and aggregation methods, and includes examples in various sectors and locations to illustrate how companies can design their own climate risk management and opportunity development processes.
Laura Millar is a program manager for Columbia University’s Sustainability Management and Sustainability Science programs.