Gensler says SEC climate disclosure rule will focus on consistency

The SEC is hearing from members of the public who'd like the agency to scale back its much-discussed climate disclosure proposal and others who are urging it to bolster disclosure standards in a final rule, but SEC Chairman Gary Gensler said his agency will simply weigh the merits of the debate to bring some consistency to the disclosures.

"The reason the public is so engaged in this is because investors currently are making investment decision based upon climate risk disclosures companies are making," Mr. Gensler said Monday at a Council of Institutional Investors conference. "So though we're merit neutral, and there are people around these debates that want to push one agenda or another, our only remit is about full, fair and truthful disclosure and try to bring some consistency to the disclosures that are already in the mix."

The climate disclosure 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.

Amy Borrus, CII's executive director, asked Mr. Gensler on Monday if the SEC might scale back the Scope 3 requirements in a final rule. Mr. Gensler wouldn't get into specifics, but said while some companies already make Scope 3-level disclosures, the area is "not as well developed."

More than 50 congressional Democrats on March 5 urged Mr. Gensler to maintain the "strong" Scope 3 requirements in a final rule.

But Republicans oppose the proposal vigorously. Three leading Republicans on Feb. 22 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.

Mr. Gensler on Monday repeatedly said the agency is merit neutral. "Congress decided that many, many decades ago," he added. "We're merit neutral, whether somebody wants to go longer risk or shorter risk, whether they want to go long green or short green, we're merit neutral. It's just about bringing consistency and comparability to the material information that investors consider when they're making investment decisions."

Either way, the rule is likely to be challenged in court.