SEC proposes new climate rules for businesses to follow

by ian

Ian Patrick, FISM News


On Monday, the Securities and Exchange Commission (SEC) released a proposal for businesses in the United States that focuses on accountability for the climate-change agenda.

In a statement on their website, SEC Chair Gary Gensler said that wealthy investors “support climate-related disclosures because they recognize that climate risks can pose significant financial risks to companies, and investors need reliable information about climate risks to make informed investment decisions.” The Biden-appointed Gensler then said the new proposal would help “disclose these risks and meet investor demand.”

The guidance posted by the SEC suggests that their “proposed rules are intended to enhance and standardize climate-related disclosures to address these investor needs.” It partially asks for information on the company’s efforts into determining “climate-related risks” and how it would affect the business and its practices.

It also asks companies to disclose how they discovered these risks and what the leadership is doing about them. It further asks for the disclosure of certain emissions and internal carbon prices, if applicable. The guidance lays out a phasing plan for companies to adjust their strategies so that they will line up with these suggestions, should the proposal pass.

The proposal was met with derision and pushback from the GOP, which argues that these rules would place an unnecessary financial burden on companies. According to Reuters, Senator Patrick Toomey, the top Republican on the Senate Banking Committee, said that the proposal “extends far beyond the SEC‘s mission.”

This concern is also coming from a voice within the SEC. Commissioner Hester M. Peirce, who was appointed under the Trump administration, released a statement voicing her displeasure with the new guidelines:

Contrary to the hopes of the eager anticipators, the proposal will not bring consistency, comparability, and reliability to company climate disclosures.  The proposal, however, will undermine the existing regulatory framework that for many decades has undergirded consistent, comparable, and reliable company disclosures.  We cannot make such fundamental changes to our disclosure regime without harming investors, the economy, and this agency.  For that reason, I cannot support the proposal.

Peirce further said the proposal will turn the duties of the SEC on its own head. She contested that the current disclosure regulations are “intended to provide investors with an accurate picture of the company’s present and prospective performance through managers’ own eyes.”

This new set of rules, Peirce argued, “Tells corporate managers how regulators, doing the bidding of an array of non-investor stakeholders, expect them to run their companies.”

The other two SEC commissioners, Allison Herren Lee and Caroline Crenshaw, agreed with the climate change guidelines in their own separate statements.

Legal challenges to the SEC proposals are expected from businesses opposed to the new guidelines. Apparently, the SEC is anticipating this and has “spent the past week shoring up the draft against potential legal challenges,” according to Reuters which cited six unnamed sources.