Republicans press SEC division head on climate disclosure proposal, proxy rules

House Republicans on Tuesday continued voicing concerns about the Securities and Exchange Commission's proposed climate disclosure rule for public companies and its work on rules concerning shareholder proposals and proxy advisory firms.

"I want you to know that we believe that this SEC are activists and trying to take a perspective of destroying market gains that might be made, employment by companies, the opportunity to stay afloat and be competitive with the world," said Rep. Pete Sessions, R-Texas, citing the SEC's climate disclosure proposal that was unveiled in March 2022 and would require public companies to disclose a host of climate-related information in their registration statements and periodic reports.

Mr. Sessions made his comments Tuesday to Erik F. Gerding, director of the SEC's division of corporation finance, who was testifying before the House Financial Service Committee's Subcommittee on Capital Markets.

In response to multiple Republican committee member questions, Mr. Gerding said the proposal is about protecting and helping investors. "Risk is about future losses that companies may face," he said. "This is the kind of disclosure, the kinds of things investors need to make investment and voting decisions."

The proposal has faced significant pushback from congressional and state Republicans and two subcommittee members — Reps. Bill Huizenga, R-Mich., and Andy Barr, R-Ky. — last month reintroduced a bill to block the proposal.

Chief among opponents' concerns is the proposal's requirement that public companies 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.

The SEC is weighing more than 15,000 public comments in crafting a final rule, including concerns over Scope 3, Mr. Gerding said.

Republicans also pressed Mr. Gerding over proxy voting.

In November 2021, the SEC's division of corporation finance rescinded two Trump-era bulletins that included language that made it more likely for the SEC to rule in favor of companies seeking no-action relief.

Shareholders can file proposals before a company's annual meeting. If a company thinks a proposal is out of bounds or has already been addressed, it can file a no-action letter with the SEC, requesting permission not to include the proposal in its proxy statement.

Also, in July 2022, the SEC rescinded two Trump-era amendments to its rules concerning proxy-voting advice that increased restrictions on proxy advisory firms.

"This rollback undermines necessary reforms to the proxy advisory duopoly and fails to protect the interests of retail investors seeking to maximize the return on their investment," said Rep. Ann Wagner, R-Mo., chairwoman of the subcommittee, referring to the July 2022 rescission.

Last week, Republicans held hearings on shareholder proposals and the influence of proxy advisory firms at public company annual meetings.

Mr. Gerding defended the agency's actions and said it works within existing regulations.