​​​​​​​​​​​​​​​In alignment with guidance provided by FHFA, Fannie Mae and Freddie Mac issued annual voluntary reports, starting with the 2020 reporting year, detailing their sustainability strategies, activities, and metrics. The Federal Home Loan Banks released an inaugural Corporate Social Responsibility Report highlighting their commitment to robust and prudential risk management and governance in June 2023. Additionally, the Federal Home Loan Bank of Dallas published a 2022 ESG Report in April 2023.

Background

The sustainability reporting landscape has evolved in recent years to include standards and frameworks for more transparency on how climate-related risks factor into an institution’s planning, operations, and performance (see table below). These frameworks also seek to standardize how institutions communicate with stakeholders and the public about their sustainability goals, progress, and risk management activities.

In addition to SEC’s climate rules, the California SB 253 bill mentioned above requires GHG Scope 3 emissions to be disclosed, whereas the SEC climate rules require accelerated and large accelerated filers to disclose only material Scope 1 and 2 GHG emissions. Also, in June 2023, the International Sustainability Standards Board (ISSB) issued inaugural standards— IFRS S17 and IFRS S28 —providing disclosure requirements, respectively, for an institution’s sustainability-related and climate-related risks and opportunities, to include GHG Scope 3 emissions. Both standards, which integrate TCFD recommendations, became effective in January 2024. SEC’s climate rules’ compliance dates are based on registrant filing status, type of disclosure, and are phased in starting in fiscal year 2025 through fiscal year 2033.

FHFA’s Reporting and Disclosures Working Group

In 2022, FHFA formed a Reporting and Disclosure Working Group to engage with FHFA stakeholders and other standard-setting bodies. Our initial focus was to gain a better understanding of existing Environmental, Social, and Governance (ESG) reporting, disclosure standards, and frameworks. Our work has evolved to help provide oversight of FHFA’s regulated entities (Fannie Mae, Freddie Mac, the Federal Home Loan Banks, and the Office of Finance) in developing and implementing compliant reporting and disclosures. This work supports FHFA’s efforts to enhance the transparency, accountability, and alignment of Fannie Mae’s and Freddie Mac’s (the Enterprises) publicly reported metrics as outlined in the Agency’s 2023 Performance and Accountability Report.9​​ Along with scanning industry best practices for sustainability disclosures, we also monitor regulatory developments to assess their potential impacts on the Agency’s regulated entities. Through this outreach and research, we have developed subject matter expertise on the climate-related reporting and disclosure landscape and have provided thought leadership and periodic briefings to Agency stakeholders and leadership.

We have set expectations for the Enterprises with respect to sustainability reporting. In particular, we have worked with the Enterprises on the alignment of metrics for sustainability reporting to enhance their transparency, consistency, and comparability, and to ensure each Enterprise’s preparedness for mandatory climate-related disclosures. We are also overseeing the development of quantitative climate metrics, including GHG emissions, and have begun monitoring Enterprise GHG emissions data and reporting readiness to align with industry best practices for enhancement and standardization of climate-related disclosures.

Current Outcomes and Continuing Focus

The Enterprises issued voluntary reports detailing their sustainability strategies, activities, and performance starting with the 2020 reporting year. Over the course of our work with the Enterprises, we have observed and guided the transformation of their reporting from an initial alignment with the SASB Standards, to the inclusion of TCFD recommendations, and then to reporting of more expansive sustainability disclosures. Specifically, following FHFA’s guidance,

​Fannie Mae released its 2021 ESG Report​ in December 2022. The report expanded on the 2020 SASB Report​ by including information on priority ESG topics, and alignment to the SASB standards, metrics, and adopting TCFD recommendations. Fannie Mae released a follow-up 2022 ESG Report in June 2023. In November 2023, Fannie Mae won an award for Best ESG Reporting at the Corporate Governance Awards hosted by Governance Intelligence. Additionally, Fannie Mae published a webpa​ge​ detailing their ESG goals and practices and with links to their ESG reporting.

Freddie Mac released its 2021 SASB Report​ in October 2022 and a 2022 Sustainability Report in September 2023. The latter, which was the Enterprise’s first sustainability report, detailed their 2022 sustainability strategy and performance, and included both a TCFD index and SASB index and metrics for 2020 to 2022. Additionally, Freddie Mac’s Corporate Sustainability Office (CSO) recently published an updated sustainability webpage with infographics and highlights pertaining to their sustainability goals and practices.

The Federal Home Loan Banks, in June 2023, released an inaugural Corporate Social Responsibility Report highlighting their commitment to robust and prudential risk management and governance in order to continue to meet the demands of their member districts. Additionally, the Federal Home Loan Bank of Dallas published a 2022 ESG Report​ in April 2023, which was the first ESG report for the Federal Home Loan Bank System.

Notwithstanding these many milestones, FHFA and the regulated entities’ work on this front is iterative, and the Reporting and Disclosure Working Group will maintain its engagement and outreach to enhance the transparency, accountability, and alignment of regulated entity sustainability reporting and disclosure. As we look ahead, a major part of our work entails evaluating appropriate standards and frameworks for future voluntary sustainability reporting. For example, we are evaluating the continued applicability of U.S. SASB Standards and the existing TCFD Framework that have been used by the regulated entities for prior sustainability reporting due to updates being made to the frameworks by the IFRS to enhance international applicability. Monitoring and ensuring regulated entity compliance with new standards, such as those imposed by the SEC’s climate-related disclosure rules, also remains a critical focus of the working group. In addition, we will monitor and assess impacts of the SEC and California climate rules on regulated entity sustainability reporting and disclosure.

FHFA will continue working with the Enterprises on the identification and resolution of climate-related data gaps to further develop and enhance their capabilities to measure and report on climate-related metrics, including GHG emissions. We will also continue our work to promote comparability between the Enterprises through alignment initiatives, and will monitor updated assurance processes for climate-related reporting.

Readers are encouraged to explore the FHFA Climate Change & ESG homepage for additional blogs and information related to climate risk.

1 Sustainability Accounting Standards Board, or SASB: https://sasb.org/about/

2 SASB framework: https://sasb.org/standards/

3 Task Force on Climate-related Financial Disclosures, or TCFD: https://www.fsb-tcfd.org/about/​

4 TCFD Framework: https://www.fsb-tcfd.org/recommendations/

5 As of April 4, 2024, SEC announced that it will stay its climate-related disclosure rules pending completion of the judicial review of consolidated Eighth Circuit petitions. FHFA’s Climate Change and ESG Reporting and Disclosures Working Group will continue to monitor further developments.

6 GHG protocol standards—with the Greenhouse Gas Protocol (https://ghgprotocol.org/standards) representing the most recognized global accounting standards—entail guidance and standardized frameworks for companies and other types of organizations to measure and account for their emissions. For accounting purposes, GHG emissions are categorized into three scopes or categories, which represent different types of emissions generated through an institution’s internal operations and larger value chain. Scope 1 emissions are direct emissions from an institution’s owned and controlled resources. Scope 2 represent indirect emissions arising from an institution’s energy consumption. Scope 3 represents other indirect emissions that result from an institution’s activities but manifest from resources not owned or controlled by the institution.

7 IFRS S1: https://www.ifrs.org/issued-standards/ifrs-sustainability-standards-navigator/ifrs-s1-general-requirements

8 IFRS S2: https://www.ifrs.org/issued-standards/ifrs-sustainability-standards-navigator/ifrs-s2-climate-related-disclosures/

9​ FHFA FY 2023 Performance and Accountability Report

Authored by: Suzanne Crump
Principal Accountant (Advisor), Office of the Chief Accountant​

Authored by: Truc-An To
Principal Accountant, Financial Disclosure Branch, Office of the Chief Accountant

Authored by: Quinn Mcdonough
Accountant, Accounting Policy Branch, Office of the Chief Accountant

Editor: Varun Joshi
Economist, Climate Change and ESG Branch, Division of Research and Statistics​​​​