Dive Brief:
- Eighty Democrats in the House of Representatives urged SEC Chair Gary Gensler on Monday to quickly push through adoption of a proposed rule mandating that companies disclose their carbon emissions and risks from climate change.
- “You have drafted a well-reasoned proposal that is grounded in financial materiality, aligns with the demands of investors and market participants, and is clearly within the SEC’s mission, authorities, long-standing norms and responsibilities,” the lawmakers said in an Aug. 7 letter. “We urge you to finalize and adopt a credible mandatory disclosure rule as quickly as possible.”
- “As climate-related risks continue to grow, investors urgently need access to decision-useful information regarding risks and opportunities that will likely have a material impact on registrants’ business, operations, or financial condition,” according to the signatories, including Kathy Castor of Florida, chair of the House Select Committee on the Climate Crisis.
Dive Insight:
Republicans on the House Financial Services Committee, during a series of hearings last month, stepped up their opposition to the proposed SEC rule and to efforts by shareholders, Democrats and other stakeholders to promote environmental, social and governance best practices.
The Republicans have said the SEC and ESG activists undermine capitalism, harm Main Street investors and thwart company efforts to increase shareholder value. The SEC also plans to propose rules on corporate board diversity and “human capital management disclosure.”
The agency is “pushing an unconventional and partisan agenda that hampers the free market system,” Rep. Ann Wagner, a Missouri Republican and capital markets subcommittee chair, said at a July 18 hearing. She and other Republicans seek limits on SEC authority over shareholder proposals and corporate disclosure.
At the state level, lawmakers in 37 states have joined a movement against “woke capitalism” and proposed 165 pieces of legislation restricting the use of ESG investment criteria, according to Pleiades Strategy. The laws would set limits on state contracting authority and pension management, among other restrictions.
Opposition to ESG has grown since March 2022 when the SEC, seeking to achieve uniformity and consistency in corporate reporting, released a proposed rule mandating that companies describe on Form 10-K their levels of greenhouse gas emissions and strategy toward reducing climate risk.
“Investors need clear, comparable and standardized disclosures to judge registrants’ climate risks,” the Democrats said in their letter to Gensler. “Finalizing a strong ruling will allow the SEC to align its requirements with those of other financial regulators around the world, reducing costs to issuers and providing more useful information to all market participants.”
The agency has twice postponed a final rule as it reviews a record 15,000 public comments. While the SEC has indicated that it plans to release the regulation later this year, Gensler declined last month to set a completion date.
“I don't have a time — it's really when the staff is ready and when the commission is ready to put something out and adopt it,” Gensler said in response to a question after a July 17 speech.
