SEC disclosure proposals pit US banks against investors

June 23, 2022|Written by |Securities & Exchange Commission

US Securities and Exchange Commission (SEC) proposals for mandatory climate-related financial disclosures have met strong opposition from the American banking industry, contrasting starkly with the support the draft rules have received from investors.

Applicable to publicly traded companies, the proposals are based on the recommendations of the Taskforce for Climate-related Financial Disclosures and would require annual reporting of greenhouse gas emissions along with details of how companies are assessing, measuring and managing their climate-related financial risks. Companies would also be required to show how they plan to meet any climate-related commitments they have made.

An open consultation on the new rules ended last week after an extension due to the volume of comments received. Submissions to the process are now publicly available, with most offering support for the proposals.

However US bankers have expressed strong resistance. The American Bankers Association (ABA), the largest financial sector group in the US, warned that the disclosure regime “may inappropriately reallocate capital and investment away from emission-producing sectors of the economy,” and asked that the proposals be withdrawn. “These requirements go far beyond the SEC’s mandate to protect investors,” their submission stated, adding that Congress was the appropriate authority for efforts to reduce greenhouse gas emissions.

The Independent Community Bankers of America, representing 5,000 smaller banks, was also critical. “Climate change disclosures should not be mandated,” they said, suggesting that SEC interpretive guidance on disclosure from 2010 was sufficient to ensure consistency of disclosures. Meanwhile the Financial Services Forum, representing eight of the country’s largest banks, called for a “more principles-based approach” and suggested weakening and delaying the proposed rules.

In contrast, submissions from investors and asset managers were much more supportive. The Council of Institutional Investors welcomed the climate-related disclosure proposals and suggested that the SEC consider addressing other sustainability related disclosures as well. BlackRock, the world’s largest asset manager, commended the SEC for its initiative and encouraged the agency to mandate disclosures for all corporate issuers.

Other investors joined with civil society groups to support the proposals. A submission from 167 investors, 166 companies and 59 non-profit organisations said that climate risk disclosure would bring significant benefits to investors and companies and called on the SEC to also consider “the broader impacts of climate change as a part of the rulemaking process, including the physical and transition impacts of the climate crisis on communities, human rights implications, and the connection between climate, water, food, and forests.”

Similar sentiments were expressed in other investor submissions and were consistent with a recent poll showing overwhelming support among asset owners and managers.

The SEC is expected to finalise its climate disclosure requirements by the end of 2022 with disclosures starting in 2024.

This page was last updated June 23, 2022

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