House Republicans call on SEC to abandon 'catastrophic' climate disclosure rule

In an April 10 hearing held to hammer the SEC’s new public company climate disclosure rule, Republicans and Democrats sparred over the rule’s legality and impact.

The SEC rule, which was finalized March 6 and requires public companies to disclose a host of climate-related information in their periodic reports and registration statements, “would be catastrophic for our markets and American competitiveness,” said Patrick McHenry, R-N.C., chair of the House Financial Services Committee during a hearing titled Beyond Scope: How the SEC’s Climate Rule Threatens American Markets.

Nine lawsuits have been filed against the rule, and the 8th U.S. Circuit Court of Appeals in St. Louis will hear the challenges on a consolidated basis. While the SEC maintains that the rule is within its authority and will defend its position in court, the agency on April 4 said it will voluntarily stay implementation of the rule pending judicial review.

McHenry on April 10 said the SEC’s stay is not enough.

“Instead, I urge Chair (Gary) Gensler to abandon this regulatory power grab and return his focus to the statutory role of the SEC: protecting investors; maintaining fair, orderly and efficient markets; and facilitating capital formation,” McHenry said. “If he doesn’t, Republicans will be forced to act.”

On the other hand, Maxine Waters, D-Calif., the committee’s ranking member, expressed disappointment that the rule didn’t go as far as the 2022 proposal on which it was based, but said once implemented, the rule “will establish a clear framework to standardize climate disclosures, and in this sense, it is historic and overdue.”

Four of the five witnesses who testified at the hearing largely opposed the rule, including Chris Wright, CEO of Liberty Energy, an energy company challenging the rule in court.

Lawsuits like the one from Liberty, business groups and Republican attorneys general, make similar arguments, claiming that the SEC doesn’t have the authority to issue such a rule, that the rule is arbitrary and capricious under the Administrative Procedure Act, and also violates the First Amendment by effectively mandating discussions about climate change.

Republicans on the committee echoed those sentiments.

But Democrats, like Rep. Joyce Beatty of Ohio, defended the rule. She said investors are clamoring for more disclosure and noted that the SEC made changes to the final rule based on feedback it received during the public comment period.

“They have bent over backwards in my opinion to address everyone’s concerns while still establishing a comprehensive disclosure framework that meets investors’ demands,” Beatty said.