More than 50 congressional Democrats are calling on SEC Chairman Gary Gensler to quickly finalize the agency's proposed climate disclosure rule and maintain the proposal's stipulation that public companies disclose details about their emissions and climate-related risks.
"This rule has already been delayed enough — and after that long delay, (the) SEC would be failing its duty to protect investors if it issues a watered-down rule missing key reporting requirements from large public companies that investors want and need," the Democratic lawmakers, led by Sen. Elizabeth Warren of Massachusetts, Sen. Sheldon Whitehouse of Rhode Island, Rep. Dan Goldman of New York and Rep. Jamie Raskin of Maryland, wrote in a March 5 letter.
The SEC proposal was issued in March 2022 and is expected to be finalized this year. It has broad backing from institutional investors and asset managers, and would require public companies to disclose a host of climate-related information in their registration statements and periodic reports, including the oversight and governance of climate-related risks by the company's board and management, and how any identified climate-related risks have affected or are likely to affect the company's strategy, business model and outlook, among other requirements.
The requirement that received the most significant debate in the proposal's comment period, which ended in June, centers on greenhouse gas emission disclosures. Under the proposal, public companies would be required to disclose the greenhouse gas emissions they generate or purchase, and the indirect emissions generated from a company's supply chain, if material, though smaller companies would be exempt from the latter requirement, referred to as Scope 3.
In their letter, the Democratic lawmakers cited media reports that the SEC is considering scaling back the Scope 3 requirements and urged Mr. Gensler to chart a different course.
"Without comprehensive Scope 3 emission disclosures, companies could also simply offload emissions-intensive activities to suppliers or downstream customers to appear cleaner without actually lowering their emissions or the resultant transition risk, or redraw their organizational boundaries so subsidiaries that they own and operate are not part of their consolidated accounting group, as is common for private equity firms," the letter stated.
At a Capitol Hill event last month, James Andrus, interim managing investment director of board governance and sustainability at the $456.6 billion California Public Employees' Retirement System, Sacramento, voiced his support for the proposal. "Getting this better information will better allow us to more efficiently allocate our funds," he said.
Congressional Republicans have a different viewpoint, and on Feb. 22, three leading Republicans wrote a letter to Mr. Gensler stating that the proposal exceeds the agency's mission, expertise and authority and, if finalized in any form, will unnecessarily harm consumers, workers and the U.S. economy.