New climate rules by corporate America will not affect global warming
The SEC’s Clean Energy Disclosure Rule Will Not Fail Until Elections Determine the Future of the U.S. Securities and Exchange Commission
The rule also requires large companies to register with the SEC to deal with climate change risks. But the biggest tussles over this rule have been over how transparent companies need to be about their greenhouse gas pollution.
Republicans have led a charge against investing that takes environmental, social, and governance factors into account. And the US faces the potential return of former president Donald Trump, who rolled back more than 125 environmental regulations during his first term — so the fate of rules on the book now could all depend on the outcome of elections this year.
The SEC blew its initial deadline to finalize the rule, and eventually watered it down, after facing backlash from industry groups and getting some 24,000 comments from the public. Many investors commented on this, and we are not requiring scope three emissions disclosures at this time, according to SEC Chair Gary Gensler.
The SEC’s plan to track Scope 3 emissions will be very expensive, intrusive and burdensome for farmers and ranchers, according to comments made by agricultural groups.
While the new SEC rules will arm investors with more information about climate risks, it is unclear what impact, if any, the regulations will have on global warming.
“Our federal securities laws lay out a basic bargain: Investors get to decide which risks they want to take so long as companies raising money from the public make what President Franklin Roosevelt called ‘complete and truthful disclosure,'” Gary Gensler, chair of the SEC, said on Wednesday. Gensler added that the SEC has “an important role overseeing the disclosures at the core of that basic bargain.”
“Whether climate disclosure at a global level will ever have the greenhouse gas emissions reduction effect we need, and whether it will have that effect fast enough, I think is still an open question,” says Cynthia Williams, a law professor at Indiana University Maurer School of Law. The disclosure regime can cause companies to take climate governance more seriously.
“Investors will be able to see more clearly which companies are sort of future-proofed,” says Williams of Indiana University. The SEC regulates to meet investor demand. For at least a decade, institutional investors have been asking for this information.
Hester Peirce, who was appointed by former president Donald Trump, warned that the new disclosure rules will be bad for investors.
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However, the rules don’t go as far as proponents had hoped. Environmentalists and some investor groups wanted regulators to also force companies to say how much climate pollution comes from things like their supply chains, investments and customers using their products. Most of the businesses’ total carbon footprint is accounted for by Scope 3 emissions.
The SEC rule is a step in the right direction according to the director of land andclimate at the Clean Air Task Force. “Now, it’s just like buying a house and you only get disclosures that the seller wants to share with you, or that they think are relevant to you.”
It’s important for the U.S. to have its own standards, according to Gensler, because what investors use to make investment decisions in the U.S. needs to be based on US law.
The SEC is being sued by a group of states that argue that the final rule is not in line with the law and violates the agency’s statutory authority. It includes West Virginia, Virginia, Georgia, Alabama, Alaska, Indiana, New Hampshire, Oklahoma, South Carolina, and Wyoming.
Congressional Republicans are also trying to overturn the new rule from the SEC. Representative Bill Huizenga (R-MI) and Senator Tim Scott (R-SC) aim to use a Congressional Review Act, an oversight tool that allows Congress to overrule federal agency actions.
“Investors should realize this overreach by the SEC will significantly hurt our economy while serving as boon for special interests and far-left activists,” Huizenga said in a statement yesterday.
