House Financial Services Committee Leadership, Senator Tim Scott Demand Information on SEC’s Proposed Climate Disclosure Rules that Exceed its Mandate, Harms Economy

The Chairman of the House Financial Services Committee, Patrick McHenry, and the Chairman of the Subcommittee on Oversight and Investigations, Bill Huizenga, along with Senator Tim Scott, the ranking member on the Senate Banking Committee, have joined in sending a letter to SEC Chairman Gary Gensler, demanding information on his “disastrous climate disclosure proposal.”

The letter states that Gensler’s initiative to ramp up climate disclosure for public firms exceeds the SEC’s statutory authority as it is outside the bounds of securities regulations.

“This sweeping rule exceeds the SEC’s mission, expertise, and authority and, if finalized in any form, will unnecessarily harm consumers, workers, and the U.S. economy.”

The elected officials say that Congress never intended for the SEC to become the arbiter of climate policies and the Commission’s attempt to incorporate a social agenda “will have significant economic and political consequences.”

ESG, or more specifically climate disclosure requirements for public companies, have been a top agenda item at the Commission under the leadership of Chair Gensler.  Critics have noted that mandating climate disclosure will further discourage companies from becoming public due to a cost of compliance that is impossible to estimate. This cost will also spill over into smaller, private firms that provide services to public companies as these firms seek to quantify climate impact by aggregrating information from all corners of the world. At the same time, the new rules will engender a new generation of firms claiming to help public firms quantify a nebulous value that will effectively become arbitrary. All of this cost will be shifted from corporations to investors who will bear the harm as a hidden tax on the economy.

At the same time, the markets have already created options for investors who have the choice of backing firms they deem to adhere to their values.

When the proposed rules emerged, SEC Commisioner Hester Peirce bitingly declared that the Commission is not the Securities and Environment Commission, at least not yet.

“Contrary to the hopes of the eager anticipators, the proposal will not bring consistency, comparability, and reliability to company climate disclosures.  The proposal, however, will undermine the existing regulatory framework that for many decades has undergirded consistent, comparable, and reliable company disclosures.  We cannot make such fundamental changes to our disclosure regime without harming investors, the economy, and this agency.  For that reason, I cannot support the proposal,” stated Commissioner Peirce.

The letter requests multiple documents from the SEC delivered no later than March 8, 2023.

During his short tenure, Chair Gensler has dramatically altered the mission of the Commission veering from its mandated responsabilities in pursuit of a radical transformation in the markets. The letter states, “Congress created the SEC to carry out the mission of protecting investors, maintaining fair, orderly, and efficient markets, and facilitating capital formation—not to advance progressive climate policies.”

The letter is available here.

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