Trakref’s Comments to the SEC

Dear Securities and Exchange Chair Gensler,

Thank you for SEC’s invitation to provide public comment on Climate-Related Disclosures, which rightly identifies the urgent need for mandatory climate and environmental, social, and governance (ESG) disclosures.

Refrigerant or F-gas emissions account for approximately 600 million tons of carbon-related emissions annually in the US. This is equivalent to 3x the CO2 emissions from passenger air travel making refrigerants and fugitive emissions an important part of disclosure accountability.

In earlier comments, we at Trakref had mentioned that unreliable content in ESG reports undermines the trust in the markets that rely on the disclosures. Investors’ intent to align their investments in companies that match their aspirations requires that the ESG reports be aligned with individual profiles and therefore they rely on the integrity of the reporting disclosures.

Fugitive emissions are commonly under-reported and often reporting entities will only disclose a portion of their emissions, to either downplay their impact to their CO2 emissions profile or because they have not invested the time to collect the data needed to report fugitive emissions because it has not been important or well enough understood. Refrigerant fugitive emissions traditionally account for between 15-50% of a reporting companies’ emissions depending on the industry and the region and so we commend the SEC for requiring attestation and assurance by companies when disclosing their Scope 1 results. Anything less would allow filers to continue the practice of estimating and therefore underreporting their emissions.

Attestation related to fugitive emissions is important and is already available through pathways that exist in the market today. Companies seeking to provide assurance for their results have immediate access to the data through computer maintenance tracking systems that monitor material transactions on invoices, as well through specialized tools like Trakref that exist to provide visibility to F-Gas 501 material transactions. Several reporting/disclosure frameworks include specific models for collecting the data: ISO 14000, the GRI (standard 305), The Climate Registry, and the IPCC provide the market with a clear understanding on how to report on emissions and how to interpret and read the reports. Also, it must be recognized that every filer have resources to provide remote attestation by using digital technologies readily available to every filer.

Investors who wish to align their climate goals with their investment activity also seek to know the impact of the companies they are investing in the environment, and by underreporting this significant sector of emissions, investors can be misled to believe that a potential investment may be trending toward net zero, while all the while the company is either doing poorly or not reporting or not aware of their emissions. Claims of Net Zero or even improvements in emissions when those improvements are the result of omissions of emissions is misleading. Resources exist in the marketplace to enable attestation.

We strongly encourage the SEC to include the attestation in your final rulemaking, in order to ensure accuracy and avoid the continued process of estimating emissions which can be misused to mislead potential investors. For instance, investors may want to base their investment decision on the \”Principle of prudence\” and not invest in companies with high internal GWP emissions related to specific emission types, such as significant HFC emissions due to poor operational performance. If these bad actors then purchase offsets because the cost of carbon offsets is more beneficial to the bottom line than the cost of fixing the leak, investors should know the type of company they are investing in. Disclosures must: ·

• Be mandatory and standardized in a way that makes them comparable across firms and sectors.
• Be easily accessible, transparent, clear, and decision-useful to all investors across different levels of sophistication.
• Include both qualitative disclosures, such as the information currently reported under the voluntary Task Force for Climate-Related Financial Disclosures, as well as specific line-item, quantitative disclosures.

Further, we encourage the SEC to consider 4 (four) areas of Risk that affect enterprise value,

• Physical Risk
• Financial Risk
• Compliance Risk – this is the impact that new regulations such as the phase-out of certain refrigerants will have on operational costs. For instance, conversion over the next ten years instead of the projected 39 years allowed under the straight-line depreciation could significantly impact a data center, hotel, or hospital’s financial success.
• The Risk to society.

Report on total greenhouse gas emissions (Scopes 1, 2, and 3) linked to their operations and their tier-one suppliers. Many protocols conflict, but if the reporting company is required to report the process, and then attest to the results, investors would be aware of the possible gaps in the companies’ reporting structure and would have better insights to a company’s maintenance maturity and internal performance.

We further encourage the SEC to require companies to include quantitative and qualitative data used in scenario analysis regarding scope three emissions, specifically direct and supply chain emissions from the cold supply chain and any governance related to outsourcing that could shift exposure from Scope1 to Scope 3 reporting by buying the end results. For instance, if Company A was leasing a building but realized this building had antiquated Comfort Cooling equipment, they may remain in place yet shift its responsibilities to the landlord and then only lease the space in a conditioned format and then bypass Scope 1 & 2 emissions placing that burden on other contracted parties. In this scenario, this transaction would enable Company A to remove its carbon exposure to these leaky systems and any responsibility for fixing the leaks. Therefore Scope 3 Emissions require significant consideration and governance in order that markets will not be allowed to manipulate their impact.

Additionally, we encourage the SEC require the data be in a machine-readable format to allow academics and other stakeholders to easily access the data.

We encourage the SEC to use their significant power to provide investors with the knowledge they need to invest in companies that align with their principles and goals. No longer are financial KPIs the only benchmark used by the investment community. Therefore, reliability in the ESG disclosures is a needed set of KPIs that require the same oversight as financial values.

Have a great safe day,

Ted Atwood

President, Trakref, Inc.