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Navigating the New Landscape of SEC Climate Disclosures

The Securities and Exchange Commission (SEC) has taken a decisive step towards integrating climate-related risks into corporate accountability and transparency. In March 2024, the SEC unveiled its climate disclosure rules, setting a new precedent for financial reporting. These rules are a response to the growing acknowledgment of climate change's impact on financial stability and investor decisions, mandating registrants to disclose detailed information on climate-related risks and their implications on business operations.

Investors will now have the ability to compare apples to apples - for the first time.  Scope 2, a corporation's carbon emissions due to using grid electricity contribute about 25% of US emissions. For the first time, investors will be able to see standardized forms of disclosures and mitigation efforts.

Understanding the SEC Climate Disclosures 

Under the SEC's climate disclosure rules, companies are now required to provide a comprehensive account of climate-related risks that materially affect their operations, strategy, and financial outlook. This encompasses both direct impacts and broader financial implications, including governance and risk management aspects related to climate risks. The rules stipulate a phased implementation, with larger companies expected to comply by June 2026 for Fiscal Year 2025, followed by smaller entities in 2028 for Year 2027 and beyond. This structured approach ensures that investors receive consistent, comparable, and detailed information, facilitating informed investment and voting decisions.

If your company is compared by an investor to Visa, Microsoft, and Colgate-Palmolive, they will see high impact mitigation through PPAs and VPPAs - which are very complex and risky solutions but are impactful at bringing new renewable energy generation online. New solutions like EAPA’s from Meta are demonstrating bilateral agreements for REC-only deals as fixed price, fixed quantity solutions to bring new renewables online without taking the energy risk.

What Does This Mean for Your Corporation? 

"The advent of standardized climate disclosure represents a pivotal moment for corporate America," says Jason Beck, Zettawatts Energy Advisor and a seasoned professional in the energy sector. "The Negative Headline Test is more relevant than ever. As companies prepare to unveil their Scope 1 and Scope 2 emissions in a unified format investors will now have a direct comparison tool between companies. Companies that fail to align their public statements with actual renewable energy purchasing decisions face a heightened risk of reputational damage."

Renewable Energy Buying Alternatives

The landscape of renewable energy procurement is evolving, with long-term Virtual Power Purchase Agreements (VPPAs), Power Purchase Agreements (PPAs), and annual unbundled Renewable Energy Certificates (RECs) as the de facto standard.  Each option presents a unique set of benefits and challenges. VPPAs and PPAs take on energy pricing volatility risk and project performance risk but are impactful in bringing on a new renewable energy project since that project is locked into its overall profit from inception.  Thousands of corporations are currently purchasing low-impact unbundled RECs from wind farms developed in 2014 and later, which don’t impact Climate Change.  This approach doesn’t bring new renewables online, and investors focused on climate change are well aware of this.  

Introducing Zettawatts' AREC Market - A Simpler, Impactful Solution

The Additionality REC (AREC) Market combines the ease of RECs with the impact of PPAs and VPPAs on building new projects. ARECs facilitate the financing of new clean energy developments, offering a straightforward, risk-mitigated, and impactful path to decarbonization. Through the AREC Market, corporations can more easily contribute to grid decarbonization, leveraging a fixed-price contract model that simplifies procurement while ensuring substantial environmental contributions.

The AREC Market addresses the complexities and risks traditionally associated with renewable energy procurement. The platform simplifies the process, ensuring that your company's investments in renewable energy are both impactful and aligned with the latest SEC disclosure requirements. Zettawatts empowers companies to demonstrate genuine additionality, aligning corporate sustainability goals with actionable environmental contributions.

This solution not only eases compliance but also enables corporations to make a tangible impact on the environment. Discover how Zettawatts’ AREC Market can streamline your compliance with SEC disclosures and enhance your company's environmental impact. Book a meeting with us here!



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