SEC Climate Risk Disclosure: What are People Saying About Proposed Rules?

This past March, Chairman Gary Gensler announced the Securities and Exchange Commission was aiming to require disclosure on climate impact for registered firms. The Fact Sheet may be viewed here.

Climate-related information would be required in firms’ registration statements and annual reports, including information about climate-related financial risks and climate-related financial metrics. The Commission under Gensler’s leadership believes the disclosure would provide decision-useful—information to investors about the impact of climate-related items on investments.

The Proposed Rule was submitted to the Federal Register with a deadline on comments scheduled for May 20, 2022. Thousands of comment letters have been submitted and most likely more are on the way. Many are being submitted as form letters generated by advocacy groups – all of which support the changes. Many commentators expressed their concern with the limited amount of time provided by the Commission (60 days) to address all 490 pages and 200+ different questions.

So what are some of the comments being made?

A long list of Republican members of the House of Representatives, said they have significant concerns regarding  the SEC’s proposed rule:

“Not only would this proposal add additional red tape and bureaucracy that would be extremely burdensome, if not impossible, for many public companies to fully comply with, but it would also far exceed the authority that Congress explicitly granted the SEC. The SEC cannot and should not mandate such public disclosures of information that strays from the “core purpose of disclosure, [which] is to provide investors with the information they need to make informed investment and voting decisions,” which “allow[s] our capital markets to flourish.”1 It is apparent that, as we have recently seen, this information would only be used to smear these companies. This proposal would drastically disrupt the current disclosure regime.”

Another letter from Senate Republicans joined in on the criticism of the proposed rule:

“The proposed rule is not within the SEC’s mission to protect investors, maintain fair, orderly, and efficient markets, and facilitate capital formation. It is unclear from where the SEC has derived this drastic change in authority. The SEC is not tasked with environmental regulation, nor has Congress amended the SEC’s regulatory authority to pursue the proposed climate disclosures. Further, there are serious questions about whether the SEC has the technical expertise to assess climate models and underlying assumptions used in companies’ metrics and disclosures. Without such technical expertise, the SEC will likely review submissions arbitrarily, leading to uneven or unfair application.”

Andrew Stephenson, Partner CrowdCheck Law, cautioned against the impact the new rules will have on smaller firms:

“We believe that the proposals do not reflect the fact that some public companies, even though they are able to avail themselves of the accommodations made for “smaller reporting companies”, are very small indeed. The Commission’s own economic analysis for this proposal identifies that it anticipates the cost for smaller reporting companies to be $490,000 in the first year to comply with the proposal, and $420,000 in subsequent years. Importantly, $350,000 is assumed to be outside professional costs for the first year, and $300,000 for outside professional costs in subsequent years. For many very small reporting companies, it is just not feasible to endure those ongoing costs.”

Matt Jessup from CIBC Wealth Management was brief with his opinion:

“This is insane. The SEC is not an environmental agency. The reporting requirements will be extremely onerous to many firms and a huge impediment to publicly listing firms. I realize that you all are owned by billionaire masters and this regulation is a way to protect their hold on the global economy, do you? Everyone sees you for what you are, extremely corrupt. You do nothing about blatant naked shorting. You have done nothing about the meme stock debacle that proved to the whole world how big of a farce US \”markets\” are. Change your direction or you will be directly complicit in the loss of confidence of US markets. Please find a conscience.”

Lawrence A. Cunningham, Professor of Law at George Washington University, on Behalf of 22 Professors of Law and Finance, said the proposal exceeds the SEC’s authority.

“In short, the evidence from shareholder proposal practices does not support the case that “investor demand” justifies invoking the SEC’s “investor protection” authority to pass the Proposal. At best, it reveals the political activism of a powerful subset.”


“The Proposal, a radical departure from current law, would require companies to disclose extensive climate-related risks that have little to do with firms’ current financial outlook but serve an ulterior political purpose.

…We respectfully urge the SEC to withdraw the Proposal.”

On the other side of the fence…

Certain Senate Democrats believe the requirements do not go far enough:

“We believe that any such rule must require disclosures about corporate lobbying and other influencing activities as they relate to climate change. Individual issuers often make conspicuous public statements about their support for climate action, committing to lofty emissions targets and other climate-related goals. Meanwhile, many of these same companies actively contribute to anti-climate lobbying efforts through their membership in trade associations. Some even work proactively to undermine climate action in Congress.”

Aarthi Ananthanarayanan, Senior Fellow, Climate and Plastics Initiative, Ocean Conservancy, lauded the rulemaking proposal:

“We strongly support the proposal of the Securities and Exchange Commission (the “Commission”) to require public companies to disclose the climate risks they are facing and their strategies for addressing these risks. We are particularly appreciative of the Commission’s detailed requirements for disclosure of Scope 1 and 2 greenhouse gas (GHG) emissions. As the proposal explains, investors’ understanding of companies’ transition risks (the risks of failure to prepare for a rapid transition to a decarbonized economy) requires detailed emissions disclosures.”

Valerie Rockefeller, co-founder and co-Chair of BankFWD, a network of individuals and organizations united in the belief that by using their collective wealth and public standing, to persuade major banks to lead on climate by phasing out financing for fossil fuels, welcomed mandatory climate disclosure:

“The financial risks posed by climate change to investors, other market participants, and the economy are real, growing, cumulative and well documented by numerous government studies including the 2018 National Climate Assessment. Climate change threatens the value of investments across the board. From big money managers to anyone with a 401k or pension plan, investors deserve the full facts so they can make informed investing decisions.”

Elizabeth Hadley, Product Manager at Planetly Carbon Management Software, said the climate disclosure rules will be “looked upon for decades as a landmark regulation:”

“I recommend the SEC creates a central repository/database for the required climate exposure reports and enables required metrics (i.e. Scope 1,2,3 emissions, GHG Intensity, etc.) to be accessible by API. Eliminating barriers of access to sustainability reporting is critical to enabling companies to benchmark against each other and enable capital markets to accelerate change via competition.”

Bryceson Charlton from Progressive Investment Management said they strongly agree with the proposed rule.

“Public companies have a significant impact on our world and have an important role in lessening the effects of climate change. As investors, we demand consistent and comparable climate-related information from all companies as climate change risks are material. Today, this data is difficult to compare, and many companies do not report this information which is problematic for investors analyzing the risks of a company. The SEC has a vital role in mandating that companies disclose their carbon emissions and climate-related risks in a consistent presentation to help protect investors. We see strong demand for this information from the clients we represent and our encouraged by this proposal.”

If you are interested, you may review all of the comments here.

Let us know in the poll below if you support the SEC requiring climate disclosure for registered firms.


Sponsored Links by DQ Promote



Send this to a friend