In Space, No One Can Hear You're Green: Standardization of Environmental Reporting, the SEC's Proposed Climate Change Disclosure Rules, and Remote Sensing Technology

Abstract

Climate change is the existential issue of our age. Its challenges are massive, its science is ever-developing and most now agree that its demands are immediate. How society deals with the immensity and immediacy of the challenge in the face of incomplete, immature, and sometimes inconclusive data is a question playing out now in our capital markets. Bending to demand from green investors and environmental activists, the United States Securities and Exchange Commission (SEC) proposed new rules on March 21, 2022, “to enhance and standardize climate-related disclosures” to better inform investors' decision-making. How should reporting companies, already obligated to report on material risks to their businesses, “enhance and standardize” climate-related disclosure when the data are ambiguous or in conflict? This article proposes one possible and currently available solution: use satellite-based data. By requiring the use of available satellite data, regulators can protect investors from being misled by cherry-picked emissions data. We begin with a case for standardization and a brief history of environmental, social, and governance (ESG) reporting and metrics, both in the United States and internationally, as well as SEC efforts regarding climate change disclosures. We then explore the precedent for satellite use and space-based technology in monitoring and regulatory compliance and argue that satellite and space data can be instrumental to help investors make more informed investment decisions based on reporting companies' true environmental impact.