By Anne Sherry, J.D.
In a letter to SEC Chair Gary Gensler, House Democrats led by Sean Casten (D-Ill), Juan Vargas (D-Cal), and Kathy Castor (D-Fla) urged the Commission to finalize a rule on climate-related disclosure. Pointing to recent progress in this area in the European Union, the signatories say that the SEC should be a leader and should not allow political controversy to delay action.
In May 2022, the SEC proposed rule changes requiring registrants to disclose how they are handling climate-related risks. The Commission missed its spring 2023 goal for finalizing the rule, pushing it back to October 2023.
The congresspersons’ letter says that the proposed climate rule is squarely within the SEC’s authority and tripartite mission. According to the letter, 2022 was the third most costly year on record for climate-related disasters, exceeding $165 billion. “These events can materially affect the financial and operational wellbeing of companies around the world, including SEC registrants,” the letter states. “The current patchwork of voluntary reporting requirements is inadequate and lacks rigor, consistency, and verifiability.”
The representatives also observe that the E.U. is implementing its Corporate Sustainability Reporting Directive. It is believed that thousands of U.S. companies will be required to comply with CSRD standards. With U.S. capital markets being “the envy of the world,” the SEC “should lead, not follow, in implementing a strong climate-related disclosure rule.” This will not only help investors compare risks between companies, it will also allow the SEC to align its requirements with those of its counterparts around the world.
The letter closes by acknowledging the pushback the SEC has received from conservative stakeholders. Calling it “unfortunate” that politics have created controversy where there shouldn’t be any, the signatories say that this should not be a reason to delay the final rule. “You have drafted a well-reasoned proposal that is grounded in financial materiality, aligns with the demands of investors and market participants, and is clearly within the SEC’s mission, authorities, long-standing norms, and responsibilities,” the lawmakers write in urging swift action.