US Democrats urge SEC to finalise climate disclosure rule

August 10, 2023|Written by |Securities & Exchange Commission

In a significant move this week, 77 US Democrats joined forces to urge the Securities and Exchange Commission (SEC) to swiftly finalise a “strong and durable” climate disclosure rule aimed at publicly traded companies.

The SEC unveiled its long-awaited proposal last March, outlining an obligation for publicly traded firms to reveal climate-related data in their SEC filings. Should this proposal be approved, it would mark the first time public companies in the US are required to report their greenhouse gas emissions, along with details of how climate change impacts their operations.

“As climate-related risks continue to grow, investors urgently need access to decision-useful information regarding risks and opportunities that will likely have a material impact on registrants’ business, operations, or financial condition,” the Congress members wrote in the letter to SEC chair Gary Gensler.

The move is a response to the corporate lobbying of many Republicans who have, in turn, opposed the climate disclosure rule, often stating it exceeds the SEC’s authority.  The letter goes on to say: “We are not naive to the environment that has unfortunately injected politics into requirements that should not be controversial… However, this should not be a reason for continued delay.”

A particularly contentious element of the proposed regulation revolves around a directive compelling certain companies to disclose emissions linked not solely to their own activities and power consumption, but also those stemming from clients and suppliers, known as scope 3 emissions.

Furthermore, another facet of the rule would require businesses to calculate their expenses tied to climate matters, assign them to distinct entries on their financial records, and report them if costs exceed 1% of the total entry.

Republican representatives have continued intense attacks against environmental, social and governance policies in a number of sectors. The Net-Zero Insurance Alliance recently lost half its members due to Republican pressure, while senators demanded that the Federal Reserve curb its involvement in climate stress testing.

The letter pointed to the European Union’s corporate sustainability reporting directive (CSRD) which will have significant knock-on effects for thousands of US companies. According to the Democrat letter, compared to the EU’s proposals the US is an inadequate patchwork of voluntary reporting requirements that lacks rigour, consistency and verifiability.

In March, over 50 Democrats from both chambers wrote a letter to Gensler, similarly urging him to complete the disclosure rules. The SEC’s most recent regulatory agenda schedules finalisation for October this year.

This page was last updated August 10, 2023

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