Democrats urge SEC to finalize ‘strong’ climate disclosure rule

More than 50 congressional Democrats are calling on SEC Chairman Gary Gensler to quickly finalize the agency’s proposed climate disclosure rule and uphold the proposal’s stipulation that public companies disclose details about their emissions and climate-related risks.

“This rule has already been delayed long enough – and after this long delay, (the) SEC would be failing in its duty to protect investors if it issued a watered-down rule missing key reporting requirements for large public companies that investors want and need. need,” 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’s proposal was published in March 2022 and is expected to be finalized this year. It has broad support from institutional investors and asset managers, and would require public companies to disclose a wealth of climate-related information in their registration statements and periodic reports, including monitoring and reporting. governance of climate-related risks by the company’s board and management, and how identified climate-related risks have affected or are likely to affect the company’s strategy, business model and outlook company, among other requirements.

The requirement that generated the most debate during the proposal’s comment period, which ended in June, concerns the disclosure of greenhouse gas emissions. Under the proposal, public companies would be required to disclose the greenhouse gas emissions they generate or purchase, and indirect emissions generated by a company’s supply chain, if material, although small businesses are exempt from this last requirement, referred to as scope 3. .

In their letter, the Democratic lawmakers cited media reports that the SEC was considering reducing Scope 3 requirements and urged Gensler to chart a different course.

“Without full disclosure of Scope 3 emissions, companies could also simply offload emissions-intensive activities onto suppliers or downstream customers to appear cleaner without actually reducing their emissions or the resulting transition risk, or redraw their organizational boundaries so that the subsidiaries they own and operate are not part of their consolidated accounting group, as is often the case for private equity firms,” the letter states.

At an event on Capitol Hill last month, James Andrus, acting chief executive of board governance and sustainability for the $456.6 billion California Public Employees’ Retirement System, Sacramento dollars, expressed support for the proposal. “Getting this better information will allow us to better allocate our funds more efficiently,” he said.

Congressional Republicans have a different view, and on February 22, three prominent Republicans wrote a letter to Mr. Gensler stating that the proposal goes beyond the agency’s mission, expertise and authority and, if finalized in any form, would unnecessarily harm consumers, workers and the US economy.

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