Sen. Joe Manchin has joined with Republicans in pushing back on a proposed rule by the Securities and Exchange Commission that would compel companies to disclose climate-related risks.
The West Virginia Democrat expressed his opposition to the plan in a Monday letter to SEC Chairman Gary Gensler. He told Gensler that the rule, which creates guidelines for how and what companies must report to investors about the emissions their companies are responsible for, might not be needed given that the overwhelming majority of major corporations already file sustainability reports that include information about climate risks.
“In that sense, one could argue that the proposed rule aims to solve a problem that does not exist,” Manchin said. “Further, to suggest that any and all public companies have the resources and capabilities to capture this data is shortsighted.”
“Forcing this rule on companies has the potential to not only impose undue financial hardships, but also to erode public trust, especially if less-resourced companies are unable to accurately report this data,” he added.
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The SEC classifies a corporation’s emissions into three categories called scopes. Scope one is a company’s direct emissions, scope two refers to its indirect emissions (such as those involved in the use of electricity), and scope three measures the emissions from other entities, such as suppliers or customers along a company’s value chain.
Under the SEC plan, the scope three reporting requirement, the most divisive, is set to be phased in gradually and includes carve-outs based on the size of a company. Scope three disclosures would also just apply to companies that consider such emissions to be “material” to investors.
Manchin, who represents coal country, said that the “most concerning” aspect of the SEC proposal is that it appears to be taking direct aim at fossil fuel companies.
“Not only will these companies face heightened reporting requirements on account of their operations, but they will also be subjected to additional scrutiny for the Scope 3 emission disclosures of other companies that utilize their services and products,” said Manchin.
The centrist senator, who is often a key swing vote for pieces of Democratic legislation, said that he believes the current structure of the proposed rule runs counter to the SEC’s mission of protecting investors, maintaining fair and efficient markets, and facilitating capital formation by “adding undue burdens on companies.”
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The proposed rule has already generated hostility from Republicans. Sen. Pat Toomey, the ranking member of the Banking Committee, branded the rule as a “thinly-veiled effort” to circumvent Congress and allow unelected regulators to set climate change policy.
“Complex political issues like global warming and energy security require tradeoffs. In a democratic society, those tradeoffs must be made by elected representatives who are accountable to the American people,” the Pennsylvania Republican said in a statement.
The American Securities Association has also expressed opposition to the proposed rule. CEO Chris Iacovella said the rule prioritizes the interests of the “ESG-Industrial Complex” over investors.
Self-reporting of climate information has become increasingly commonplace in business as investors increasingly embrace environmental, social, and governance, or ESG, standards. The SEC’s rule would further enmesh the ESG push into the way that corporations do business, although even before the proposed rule, some states have bucked corporate ESG policies.
Republicans have pushed back. Texas Gov. Greg Abbott signed a bill that forbids state investments in businesses that cut ties with fossil fuel companies, and the West Virginia Senate passed a bill empowering the state’s treasurer to make a list of firms that refuse to do business with fossil fuel companies and to reject those companies from consideration for state financial contracts.
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While Manchin and Republicans have panned the proposal, some Democrats have wholeheartedly embraced the SEC’s push. Sen. Sherrod Brown, chairman of the Banking Committee, contends the rule would protect workers, investors, and the economy from climate change-related risks.
“The SEC’s proposal is a step forward and would establish for the first time consistent data frameworks, balancing the need to accurately evaluate market risks while ensuring small businesses aren’t overburdened,” the Ohio Democrat said.
