Environmental groups cheered news on Monday of a newly proposed Securities and Exchange Commission rule that would require companies to issue climate change-related disclosures, welcoming new regulations as helping to move the economy away from fossil fuels.
The rule, pitched by the commission as a means of better informing investors of risk to returns, is part of the “whole of government” approach the Biden administration has taken in crafting policies meant to mitigate the impacts of climate change, and its publication coincides with a broader campaign by environmentalists pressuring President Joe Biden to speed up the “energy transition” away from oil and gas.
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The SEC’s proposal would require public companies to disclose different kinds of climate-related financial risks, including their direct and indirect greenhouse gas emissions.
It would also require disclosure of how climate-related risks affect a given company’s business model, as well as specified information related to any “climate-related targets or goals” it has set for itself, among other things.
Claire Healy, who heads up the Washington, D.C., office of Europe-based green group E3G, said the proposal would make it easier for investors “to do the right thing and more swiftly shift their investments to build a low carbon economy.”
“Embedding this information in investment decisions makes common sense and should lead to a fast tracking of clean energy and a more robust framework to manage economic and financial risks,” Healy said.
Evergreen Action chief of staff Lena Moffitt said the standard “will level the playing field and arm investors with vital information to protect their financial futures” and praised Chairman Gary Gensler for correcting a “market deficiency” in marshaling through the proposal, although she said the rule should be more stringent on emissions disclosures.
Gregory Wetstone, who heads green industry group the American Council on Renewable Energy, said the proposed rule will give investors “consistent, transparent, and forward-looking information they need to ensure their investments are helping to reduce greenhouse gas emissions and contributing to climate solutions, like renewable energy.”
Many Democrats and environmentalists see the involvement of financial regulators as key to encouraging both the displacement of fossil fuels and the expansion of lower-emitting energy sources, and the SEC proposal puts the U.S. on track with the United Kingdom and European Union, which have their own disclosure frameworks in place.
Meanwhile, many Republicans and oil and gas industry groups have strongly opposed climate-related financial regulations, whether coming from the Federal Reserve or the SEC.
“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,” Senate Banking Committee ranking member Pat Toomey said in a statement Monday.
The American Petroleum Institute, a leading trade group, asserted companies in the industry already have a “long history of sustainability reporting.”
“We are concerned that the Commission’s sweeping proposal could require non-material disclosures and create confusion for investors and capital markets,” Frank Macchiarola, API’s vice president of policy, said Monday.
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The SEC’s new proposal also stands alongside a recent shift of sorts for the Biden administration, which in recent weeks has begun to encourage domestic oil production more explicitly in response to the Russia-Ukraine war’s effect on prices and to beckon more investment from Wall Street.
