Washington’s revolving door is getting a fresh green paint job: Federal architects of a controversial new rule requiring businesses to measure their carbon footprints throughout their supply chains have joined a start-up company poised to reap millions by performing those calculations.
Documents show that the SEC relied on input from the for-profit company to draft the proposed rule. Some critics argue that the estimates from Persefoni low-balled the price tags unrealistically for such accounting to make them more politically palatable.
Persefoni, billing itself as “The Platform for Carbon Accounting—Built for Climate Disclosure,” and similar outfits are emerging as their own service industry as they stand to profit from the new rule, since most companies do not have the staff or expertise to calculate their carbon footprints.
Although environmentalists have hailed the rule as an important step in forcing companies to grapple with their effect on the climate by exposing it to the public, critics argue that it goes far beyond the SEC’s core mission of protecting investors. In voting against a draft of the proposal, SEC Commissioner Hester Peirce, a Trump appointee, said that it “forces investors to view companies through the eyes of a vocal set of stakeholders”—as opposed to traditional shareholders—“for whom a company’s climate reputation is of equal or greater importance than a company’s financial performance.”
The SEC and Persefoni each declined to comment for this article.
- Meetings on Sept. 14, Nov. 23, and Nov. 30 between Persefoni and the SEC office of the chair, Gary Gensler.
- Meetings on March 28 and April 5 between Ceres and the Office of Commissioner Allison Herren Lee.
- One joint meeting involving Persefoni, Ceres, and ERM with the SEC’s Division of Economic and Risk Analysis, the Division of Corporation Finance, and the Office of the Chief Accountant.
By all accounts, the SEC leaned heavily on Persefoni’s cost-benefit analysis of the pending rule, which essentially establishes a parallel disclosure regime for the SEC—all in the name of mitigating climate change.
The SEC proposal has many parts, but the most controversial and cumbersome involves the requirement that larger companies must provide soup-to-nuts calculations of their carbon emissions, including those from thousands of their suppliers operating across hundreds of countries.
Since most of the emissions that must be measured are not directly generated by the companies, the calculations amount to a herculean task. This is where an outfit such as Persefoni comes in.
Rupert Darwall, an author and energy policy analyst affiliated with the libertarian Competitive Enterprise Institute and a senior fellow at the RealClearFoundation, has been critical of what he views as a lack of transparency and accountability on the part of the SEC, which gives cover to outside partners that stand to gain once the rule takes effect.
“Persefoni has a glaring conflict of interest in low-balling cost of compliance estimates to the SEC, which the SEC should have disclosed and been mindful of. Instead, the SEC put undue weight on these implausibly low estimates,” Mr. Darwall said.
Estimates of indirect emissions across supply chains “are especially risky for filers as there’s no limiting principle and, contrary to longstanding accounting principles, multiple companies account for the same emission.” He also makes the point that Persefoni’s low-cost estimates are “at odds of what it’s been telling investors about the revenues it projects from the rule.”
Although the letter is dated May 20, 2022, the SEC did not publish it until the final week of the comment period ending June 17, 2022, curtailing the period for public scrutiny of the Persefoni estimates.
One critic is Bonner Cohen, a senior fellow with the National Center for Public Policy Research in Washington, D.C.
Knowing Which Way the Windfall Blows
Although the SEC and Persefoni would not comment for this article, Steven Rothstein, managing director of the Ceres Accelerator for Sustainable Capital Markets, told RCI that there is not any conflict of interest at work. He pointed out that Ceres has been advocating a climate disclosure rule with the SEC for the past two decades.“The U.S. Securities and Exchange Commission received 15,000 public comments around this rule,” Mr. Rothstein said in an email. “Among the most comments than any in the SEC’s 90-year history. Everyone has a vested interest in the future of their investments and retirement savings. The comments will make the final rule stronger and more robust. The investment community is overwhelmingly supportive of more climate information as a way to reduce material financial risk.”
“You’re going to have a Salesforce-type of success,” he said. “Just like Salesforce created the system of record for the customer record, companies like us—you will have one or two big winners—will create a system of record for the carbon accounting piece.”
“Really they have a very short runway to get their act together,” he said. “We’ve gotten lots of calls from these large companies saying, ‘Tell us about what you do and how we can work with you.’”
Mr. Mohin went on to describe Persefoni as the “TurboTax of greenhouse gas reporting.”
As for the rule itself, Mr. Cohen sees “an effort by the SEC and its climate-cartel cronies to fashion a climate accounting standard to fit the inherently amorphous notion of a carbon footprint.”
He continued: “Companies will have to disclose their ‘climate impacts’ in accordance with the SEC’s purely arbitrary requirements. The arrangement will put more power into the hands of the SEC, enrich the likes of Persefoni, and condemn regulated businesses to climate serfdom.”
