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September 29, 2021 Feature

Science and Technology Issues in Regulating Climate-Related Disclosures

By Dr. Robert F. Brammer

Addressing climate change is an essential policy of the Biden administration and many of the world’s largest corporations.1 The scientific community attributes much of the cause of climate change to greenhouse gas (GHG) emissions caused by human activities.2 Despite many actions to reduce emissions, the GHG levels are at the highest recorded levels.3 Consequently, there are increasing concerns about climate change becoming a threat to financial stability.4

Increasing numbers of companies are providing climate-related disclosures because of concerns among investors and regulators about the potential for financial impacts from climate change. These disclosures describe organizational actions to reduce climate impacts and provide investors with information about climate-related risks and mitigation measures. Today, these disclosures are voluntary. However, there is increasing activity toward making climate-related disclosures mandatory for public firms.5 Mandatory disclosures will raise many legal issues, as discussed in several recent papers.6 This paper complements those works by focusing on science and technology issues and providing recommendations to professionals interested in working in this arena.

Climate-Related Corporate Disclosures

Currently, there are two classes of climate-related corporate disclosures. The first describes how a corporation affects climate (e.g., GHG emissions and water usage). Several organizations, including CDP (formerly the Carbon Disclosure Project), collect this information.7 The leading standard for reporting this information is the Greenhouse Gas Protocol that guides corporations in building an emissions inventory and reporting.8

The second class of disclosures describes how the climate affects a company (e.g., physical risks, risks transitioning to a low-carbon economy, litigation, regulatory, and reputational risks). The leading organization developing a framework and guidance for this class of disclosures is the Task Force on Climate-related Financial Disclosures (TCFD).9 The TCFD framework enables companies to make disclosures in governance, strategy, risk management, and metrics. An earlier SciTech Lawyer paper describes the TCFD and American Bar Association relationship.10

Despite disclosures now being voluntary, the number of organizations making disclosures is increasing rapidly. CDP reports that disclosures increased by more than 20 percent in 2019, from 7,000 to 8,400 companies. Companies disclosing to CDP represent more than 50 percent of global market capitalization and investors with more than US$100T in assets. The TCFD now has more than 2,000 supporting organizations in seventy-eight countries.

While this growth is encouraging, much more progress is necessary to achieve the objectives of CDP and TCFD.11 Unfortunately, some current “disclosures” are greenwashing (i.e., claims lacking a scientific basis). For example, recently published a status report of legal actions, including class action lawsuits, involving alleged greenwashing by corporations.12 Moreover, some companies may not have adequate capabilities to measure emissions or assess climate-related risks to enable business decisions. Causes for these shortfalls include current limitations in weather and climate models and staff expertise. These models have improved significantly in recent years, and improvement will continue. They can provide helpful insights for business decisions. However, even leading models currently lack sufficient spatial and temporal resolution and accuracy to support the asset-level risk assessment that corporate executives need.

Regulation Amid Significant Uncertainty

Leading regulators, including the Federal Reserve, the SEC, and the CFTC, have planning activities related to possible mandatory climate-related disclosures. For example, in March, the SEC created a Climate and ESG (Environmental, Social, Governance) Task Force.13 Furthermore, in April, a group of senators and representatives introduced a bill entitled the Climate-Risk Disclosure Act.14 The bill directs the SEC, in consultation with other agencies, to issue rules within two years requiring public companies to make disclosures of emissions, fossil fuel–related assets, potential impacts on company valuation from climate change scenarios, and risk management strategies.

Regulators could act in some ways without congressional legislation. For example, the CFTC report discusses climate-related disclosures and current regulatory authorities and states, “. . . regulators are not fully utilizing their authorities to monitor and manage climate risk.” However, it also states that “[f]urther rulemaking, and in some cases legislation, may be necessary. . . .”

Regulators need to recognize the scientific uncertainties in developing regulations. Thus far, the SEC has relied on a “principles-based approach” to give companies guidance about climate risks becoming material.15 A principles-based approach uses broad guidelines (e.g., discuss material climate issues in the MD&A section of a 10K) as distinguished from a prescriptive approach that gives specific requirements. Thus far, the principles-based approach has not led to disclosures meeting investors’ needs, as shown by many initiatives to improve disclosures. The proposed Climate Risk Disclosure Act is a more prescriptive approach to regulation involving stress testing.

Regulators, notably the Federal Reserve, often use scenarios (e.g., for stress testing of large banks16). The TCFD also uses scenarios in its recommendations for climate-related disclosures and provides useful tutorial material on scenario analysis and planning.17 Scenarios have also been significant in the IPCC assessments since the process began in 1990.18

While widely used, there have been criticisms of these IPCC scenarios and their uses.19 If climate-related disclosures become mandatory, controversies over scenarios will grow. The recent pilot exercise conducted by the European Banking Authority (EBA) shows some complexities in scenario-based practices for assessing climate-related risks. For example, the banks did not agree on how to classify assets within the EBA taxonomy. These results show difficulties in defining a standard framework for the banking community and imply further problems extending frameworks to other industries. However, investors need a common framework for effective comparisons. Furthermore, the EBA released a report in June 2021 saying banks should raise their planning horizon to ten years and use various ESG scenarios to guide their planning.20

The Bank of England (BOE) published the Climate Biennial Exploratory Scenarios (CBES) in June to test banks and insurers.21 The three scenarios of early, late, and no action model possible future developments. These are applied over thirty years, reflecting the longer-term nature of climate-related risks.

The CBES uses three scenarios to explore the two key risks from climate change: the risks that arise as the economy moves from a carbon-intensive one to net-zero emissions (transition risks) and risks associated with the higher global temperatures likely to result from taking no further policy action (physical risks). All three scenarios explore both transition and physical risks, to a different degree.

The CBES scenarios are not forecasts of the most likely future outcomes. Instead, the scenarios are plausible representations of what might happen based on different future paths of governments’ climate policies (policies aimed at limiting the rise in global temperature). Each scenario is assumed to take place over the period 2021–50.22

The BOE intends for the CBES to be a learning exercise and will not set capital requirements based on these results. However, the experience from this exercise will form the basis for future capital requirements.

There have been many initiatives to improve disclosure quality.23 However, we need to ask how accurate and complete these disclosures are and how accurate and complete these disclosures must be to provide helpful information. The CDP database for 2019 “includes data or estimates for 5000 companies, whose emissions equated to 35 percent of global emissions.”24 Despite this scale, there are still significant limitations in the content of the data. For example, CDP produces most emission values from regression models based on company revenues and other simplifying assumptions. Additionally, there is no estimate for the accuracy of reported values.

The CDP accepts “verification” reports from third parties and takes steps to ensure consistency in their database.25 However, these verifications are procedural (i.e., verifying a defined process), and there is no validation of the accuracy of reported information. The distinction between “verification” and “validation” is significant. Professional quality management systems require both verification and validation.26 However, the CDP documents do not address validation. Investors may require substantial quality improvements in disclosures before using them for decision-making. In fairness to CDP, estimating emissions is an exceedingly complex problem, and they have developed creative procedures to improve the quality of reported data and the overall database. Bloomberg LP has recently launched another new service providing estimates of GHG emissions based on a machine learning algorithm.27 As another type of “disclosure,” I am now working on an inter-comparison effort with selected GHG data sources to get more insights into the accuracy of these estimates.

Significant improvements are necessary for the second class of disclosures, both related to physical and transition risks. To improve their understanding of physical risks, companies are working with consultants in using climate data and models. Current data and models provide helpful insights for some business decisions.28 However, there are many limitations in today’s science that executives and regulators must understand for assessing risks.29 For example, most “integrated assessment models (IAMs)” (i.e., models that integrate climate with economics) show a slow, steady increase in temperature and emissions.30 However, current IAMs do not include all physical, chemical, biological, and socioeconomic processes that may significantly affect climate.31 These processes may combine in ways that modelers do not yet fully understand.

Current limitations in climate models include incomplete descriptions of nonlinear phenomena in earth systems, notably the polar regions’ feedback. These feedback processes accelerate icecap melting, sea-level rise, and flooding risks in coastal areas. There is some probability that a major ice shelf falling into the ocean could cause abrupt climate changes.32 While the likelihood of such events is low, the effects could be massive, and current models do not capture the possibilities of such tipping points.33

Companies must also improve their assessments and disclosures of transition risks in changing their businesses to succeed in a low-carbon economy. In some sectors, transition risks are considerable. A recent survey of the possible impact on global GDP of stranded assets (e.g., oil fields and coal mines) produced an estimated cost of US$1T–US$4T.34 To mitigate transition impacts, some companies have launched lines of business to reduce emissions and develop new revenue sources. For example, Occidental Petroleum has plans to capture CO2 directly from the atmosphere and bury it or use it to improve operations efficiency.35 Company disclosures of their transition risks must address many issues, including stranded assets and new business risks.

Requiring audits of company climate-related disclosures to use a defined framework would increase the credibility of disclosures and claims of reaching net-zero milestones.36 To address this need, the International Federation of Accountants (IFAC) published a report in June on the status and plans for improvement in auditing ESG-related information.37

Some critics say that many net-zero claims are vague and lack uniform definitions.38 However, these same critics offer ideas for improvements.39 The four leading audit firms have announced a framework that includes climate-related disclosures.40 Under the auspices of the World Economic Forum, this initiative aims to provide a standard audit framework for metrics and disclosures to enable industrywide consistency.

A carbon accounting standard will be critical to the country-level negotiations at the UN COP26 conference in November.41 In particular, discussions around Article 6 of the Paris agreement collapsed at COP25 in 2019 due to differences in accounting approaches. An objective of COP26 is to resolve these issues.

Many companies, including the 1,500 companies registered with the Science-Based Targets Initiative (SBTI), have developed a Paris Agreement alignment.42 This alignment intends to show how company targets contribute to achieving a global goal. The SBTI helps companies develop targets using established processes. A technical advisory group approves the plan. A review of the SBTI shows “a mixed picture of progress.”43 According to self-reporting information, most companies were on track, but nearly half were behind on one or more targets. However, the SBTI’s record will likely improve in time.

Mandatory regulations must withstand legal challenges to succeed. Challenges may include the scope of the agency’s charter or whether the rule violates the plaintiff’s statutory rights.44 The U.S. Climate Change database at the Sabin Center for Climate Change Law at Columbia University tracks litigation and administrative proceedings related to climate change.45 This database will likely multiply in response to ongoing developments, including the recent ruling in a Dutch court directing Royal Dutch Shell to accelerate emissions reductions.46

New Developments in Science and Technology

Pitchbook, the leading venture capitalist (VC) information provider, lists more than 1,800 companies in cleantech or climate tech.47 A recent report states, “Climate tech represents a vast opportunity that currently amounts to a $2.5 trillion market encompassing energy, transportation, agriculture, buildings, industry, climate adaptation, and materials & resources.”48

A BloombergNEF report describes the motivation for climate-tech investments:

Many of the world’s largest corporations are pledging to eliminate or offset all their emissions, including Scope 3. But very few companies can accurately quantify their carbon footprints, or determine the main sources in their supply chain. Without this information, it is difficult to set realistic carbon reduction goals or credibly meet them.49

Improving estimates of carbon footprints and impacts requires greatly improved carbon accounting. Current systems hamper companies in setting realistic goals and validating achieving them. Consequently, the value of climate-related disclosures for investment decisions will be limited until the state of the art in estimates improves, as described below.

Developments contributing to improved carbon accounting include the following areas (among others):


  • Earth satellite remote sensing systems. Analysis of data collected by both NASA and commercial satellites can improve emissions and carbon capture estimates.50 Large companies, including Spire, Planet, and Maxar, and startups, including Kayrros, Pachama, and Albo Systems, offer services based on satellite data and machine learning. Companies can use their services to improve carbon accounting.
  • Carbon accounting information systems. To provide data about emissions and compliance with targets, companies need strategies to analyze company operations and supply chains. These analyses enable companies to track their carbon footprints and impacts. New developments intend to reduce costs and complexity and provide improved functionality and security. Some companies are using blockchain technology to capture supply chain data to meet these objectives. Others are developing systems to analyze company data and integrate with carbon credit trading exchanges. Examples include Sinai, Emitwise, CarbonSpace, and Singularity.
  • Climate modeling as a service. Several companies provide model-based information to corporations and government agencies about potential risks and impacts of climate change.51 Companies like RMS and Air Worldwide are among the leading providers of catastrophe modeling services, notably to the insurance industry. Newer organizations, including the First Street Foundation, TCS, Jupiter Intelligence, and others, provide weather and climate forecasts and scenario-based risk assessments. They incorporate research from government laboratories and universities in seasonal to interannual weather forecasting, regional climate modeling, and related fields.52 Researchers are improving models by integrating more highly resolved physics, chemistry, and biology, and extended analysis of uncertainties and impacts.53

Recommendations for Interested Professionals

Some of the world’s biggest companies and deepest-pocketed investors are lining up trillions of dollars to finance a shift away from fossil fuels.54

—Scott Patterson and Amrith Ramkumar


Such changes in the global economy will lead to regulatory changes. Furthermore, the recent changes in the ExxonMobil board membership indicate the potential for other changes in corporate governance on climate-related issues.55 Such developments offer opportunities to professionals in business formation, mergers and acquisitions, intellectual property, litigation, and other areas. Here are some recommendations.


  • Opportunities at the intersection of law, science, and technology. Given the nature of climate change and the measures to mitigate risks and respond to opportunities, succeeding requires an understanding of aspects of the law, science, and technology. Given the scale, growth, and significance of climate change and potential regulatory actions, professionals with such understanding will have many opportunities.
  • Ability to deal with controversy. On March 18, 2021, twenty-five Republican members of the Senate Banking Committee sent a letter to Jerome Powell, Federal Reserve Chair, urging him “to refrain from taking any additional actions concerning climate-related risks that would impose certain costs for uncertain benefits.”56 Conversely, on April 1, twenty-five Democratic members of the House sent a letter to Chair Powell expressing concern “over the limited action of the Federal Reserve to prepare our financial institutions and broader economy for the risk and destabilizing impact of climate change.”57 To succeed in the regulatory arena of climate change, professionals need a solid background in relevant areas of science and technology and their legal implications and the ability to deal with highly diverse and firmly held perspectives.
  • Maintaining a current posture in a highly dynamic arena. The situation in possible regulatory actions changes daily. Science is advancing rapidly now, particularly in preparation for the IPCC assessment in 2022. New climate-tech developments are also multiplying rapidly. Pitchbook and BloombergNEF report a record number of venture capital deals in 2020, with funding for climate-tech startups increasing to $17B.58 Accordingly, professionals who want to focus on this arena must prepare to invest time tracking rapidly evolving developments.

In summary, climate change is a globally significant issue with many health, safety, and financial implications. Properly implemented regulations can be essential to mitigate climate risk. Corporate disclosures will become helpful to investors when improvements such as those discussed here occur. The success of the current principles-based approach to regulation depends on companies making auditable disclosures in a framework that enables decision-making and continuing pressures from investors.

Scientists are rightly confident in their understanding of the global effects of emissions and recommendations to mitigate climate risks by reducing and reversing emissions. We cannot yet make specific predictions at the temporal and spatial scales of company business plans. However, we cannot accept views that uncertainties in some aspects of our understanding of climate change imply doubts about all aspects. We need to endure some risks and costs to gain the benefits that appear possible from keeping global temperatures down. Significant quantification and accuracy estimates are what many people are working urgently to develop. Governor Mark Carney of the Bank of England said, “. . . once climate change becomes a defining issue for financial stability, it may already be too late.”59 Improving the regulatory environment with the developments described here can help mitigate the risk of climate change becoming a defining issue for financial stability.


1. White House, Executive Order on Climate-Related Financial Risk (May 20, 2021). The Science-Based Targets Initiative (SBTI),, now has nearly 1,500 companies registered.

2. Intergovernmental Panel on Climate Change (IPCC), Special Rep.: Global Warming of 1.5o C,

3. Global CO2 Emissions Set to Surge in 2021 in Post-Covid Economic Rebound, Yale Env’t 360 (Apr. 20, 2021).

4. Mark Carney, Gov. of Bank of England, Speech at Lloyd’s of London: Breaking the Tragedy of the Horizon—Climate Change and Financial Stability (Sept. 29, 2015); Commodity Futures Trading Comm’n (CFTC), Managing Climate Risk in the U.S. Financial System (Sept. 9, 2020).

5. Ceres, Turning up the Heat: The Need for Urgent Action by U.S. Financial Regulators in Addressing Climate Risk (Apr. 2021).

6. Hana Vizcarra, Entering a New Era in Climate-Related Disclosure and Financial Risk Management in the U.S., Harv. L. Sch. (Feb. 17, 2021); Rhys Davies et al., DLA Piper, Lessons in Climate Risk Reporting on the Path to Mandatory Disclosure (Dec. 11, 2020).

7. CDP,

8. Greenhouse Gas Protocol,

9. Task Force on Climate-related Financial Disclosures,

10. Robert F. Brammer & Preetha Chakrabarti, SciTech and the Task Force on Climate-related Financial Disclosures, 15 SciTech Law., no. 4, Aug. 2019.

11. There are many other organizations involved in similar activities.

12. Earth Day 2021: Companies Accused of Greenwashing, Truth in Advertising (Apr. 19, 2021).

13. Press Release, Sec. & Exch. Comm’n (SEC), SEC Announces Enforcement Task Force Focused on Climate and ESG Issues (Mar. 4, 2021).

14. The Climate-Risk Disclosure Act, H.R. 2570, 117th Cong. (introduced by Rep. Sean Casten (D-IL) Apr. 15, 2021).

15. William Hinman, Applying a Principles-Based Approach to Disclosing Complex, Uncertain and Evolving Risks, SEC (Mar. 15, 2019); SEC, Commission Guidance Regarding Disclosure Related to Climate Change, 75 Fed. Reg. 6290 (Feb. 8, 2010).

16. 2021 Stress Test Scenarios, Bd. of Governors, Fed. Rsrv. (Feb. 16, 2021),

17. The Use of Scenario Analysis in Disclosure of Climate-related Risks and Opportunities, TCFD,

18. The United Nations created the Intergovernmental Panel on Climate Change (IPCC) to provide policymakers with regular scientific assessments on climate change, its implications, and risks. See Jiesper Pedersen et al., An Assessment of the Performance of Scenarios Against Historical Global Emissions for IPCC Reports, 66 Glob. Env’t Change 102199 (Dec. 10, 2020).

19. Roger Pielke & Justin Ritchie, Distorting the View of Our Climate Future: The Misuse and Abuse of Climate Pathways and Scenarios, 72 Energy Rsch. & Soc. Sci. 101890 (Feb. 2021).

20. EBA, Report on Management and Supervision of ESG Risks for Credit Institutions and Investment Firms, EBA/REP/2021/18 (June 2021).

21. Bank of Eng. Key Elements of the 2021 Biennial Exploratory Scenario: Financial Risks from Climate Change (June 8, 2021),

22. Id. at 3.

23. E.g., Tom Erb, Improving Climate-Related Financial Disclosures, Ctr. for Climate & Energy Sols. (Apr. 20, 2020).

24. CDP, CDP Full GHG Emissions Dataset: 2019 Summary and Technical Appendices (Jan. 2020),

25. Verification, CDP,

26. David Hoyle, ISO 9000 Quality Systems Handbook (2005).

27. Distributional Greenhouse Gas Emission Estimates, Bloomberg (2021).

28. Tanya Fiedler et al., Business Risk and the Emergence of Climate Analytics, 11 Nature Climate Change 87 (Feb. 2021).

29. Tim Palmer & Bjorn Stevens, The Scientific Challenge of Understanding and Estimating Climate Change, 116 Proc. Nat’l Acad. of Scis. 24390 (Dec. 2019).

30. Gayathri Vaidyanathan, Core Concept: Integrated Assessment Climate Policy Models Have Proven Useful, with Caveats, 118 Proc. Nat’l Acad. of Scis. e2101899118 (Mar. 2021).

31. Robert S. Pindyck, The Social Cost of Carbon Revisited, 94 J. Env’t Econ. & Mgmt. 140 (2019).

32. A.K. Wahlin et al., Pathways and Modification of Warm Water Flowing Beneath Thwaites Ice Shelf, West Antarctica, 7 Sci. Advances eabd7254 (Apr. 9, 2021).

33. Timothy M. Lenton et al., Climate Tipping Points—Too Risky to Bet Against, 575 Nature 592 (Apr. 20, 2020).

34. J. F. Mercure et al., Macroeconomic Impact of Stranded Fossil Fuel Assets, 8 Nature Climate Change 588 (2018).

35. Leslie P. Norton, Big Oil’s Transition to Cleaner Energy Is Risky. How Investors Can Prepare., Barron’s (May 21, 2021).

36. Kelly Levin et al., What Does “Net-Zero Emissions” Mean? 8 Common Questions, Answered, World Res. Inst. (May 2021).

37. Int’l Fed. of Accts., The State of Play in Sustainability Assurance (June 2021).

38. See, e.g., Levin et al., supra note 36.

39. Joeri Rogelg et al., Comment, Three Ways to Improve Net-Zero Emissions Targets, 591 Nature 365 (Mar. 18, 2021).

40. Gillian Tett, Big Four Accounting Firms Unveil ESG Reporting Standards, Fin. Times (Sept. 22, 2020).

41. UN Climate Change Conf. UK 2021,

42. The Paris Agreement, UN Climate Change,

43. Jannik Giesekam et al., Science-Based Targets: On Target?, 13 Sustainability 1657 (2021).

44. Challenging Regulatory Actions, Justia,

45. About, Climate Change Litig. Databases,

46. Toma Hals & Shadia Nasralla, Analysis: Big Oil May Get More Climate Lawsuits After Shell Ruling—Lawyers, Activists, Reuters (May 28, 2021).

47. “Clean tech” and “climate tech” are synonymous here.

48. Climate Tech 2020, Pitchbook,

49. Sarrah Raza, Matt Bravante & Claire Curry, Understanding and Monitoring Our Changing Planet, at 4 (BloombergNEF White Paper, May 27, 2021).

50. Alexandra Witze, NASA Reboots Its Role in Fighting Climate Change, Nature (May 20, 2021); Bezos Earth Fund Supports EDF Science and Solutions, Env’t Def. Fund,; Midhum Mohan et al., Afforestation, Reforestation and New Challenges from COVID-19: Thirty-three Recommendations to Support Civil Society Organizations (CSOs), 287 J. Env’t Mgmt. 112277 (June 2021).

51. Fiedler et al, supra note 28.

52. William J. Merryfield et al., Current and Emerging Developments in Subseasonal to Decadal Prediction, 101 Bull. Am. Meteorological Soc’y E869 (June 2020).

53. Salvatore Pascale et al., Increasing Risk of Another Cape Town “Day Zero” Drought in the 21st Century, 117 Proc. Nat’l Acad. of Scis. 29495 (Nov. 24, 2020).

54. Scott Patterson & Amrith Ramkumar, Green Finance Goes Mainstream, Lining Up Trillions Behind Global Energy Transition, Wall St. J. (May 22, 2021).

55. Christopher M. Matthews, Activist Wins Exxon Board Seats After Questioning Oil Giant’s Climate Strategy, Wall St. J. (May 26, 2021).

56. Letter from Sen. Pat Toomey et al., S. Comm. on Banking, Hous. & Urb. Aff., to the Honorable Jerome Powell, Chair, Bd. of Governors, Fed. Rsrv. Sys. (Mar. 18, 2021).

57. Letter from Rep. Mondaire Jones et al., Members of Congress, to the Honorable Jerome Powell, Chair, Bd. of Governors, Fed. Rsrv. Sys. (Apr. 1, 2021).

58. Climate Tech 2020, supra note 48; Technology Radar—Climate Technology, BloombergNEF (Feb. 16, 2021).

59. Carney, supra note 4.

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By Dr. Robert F. Brammer

Dr. Robert F. Brammer is the president and chief executive officer of Brammer Technology, LLC, in Andover, Massachusetts, a consultancy focusing on advanced information technology, environment and climate, and security. He retired as vice president and chief technology officer for Northrop Grumman’s Information Systems sector and currently serves as chair of the ABA Science & Technology Law Section’s Cleantech and Climate Change Committee.