Last week, the Securities and Exchange Commission (SEC) adopted new climate disclosure requirements that align with the agency’s ESG ambitions [environmental, social, and governmental]. The new rules have been criticized by opponents as not aligning with the SEC’s mission while creating a situation where both public and private firms will be saddled with new costs that will inevitably be covered by customers and investors.
Beyond veering from the Commission’s mandate to enable effective markets and capital formation, the climate disclosure rules are emblematic of the highly political tone the Commission has adopted under SEC Chairman Gary Gensler’s leadership.
Following the approval of the rules, Senator Tim Scott, the ranking member of the Senate Banking Committee, issued a statement slamming the Commission’s decision as exceeding the scope of the SEC’s authority, which will bury public companies in additional costs and paperwork.
Senator Scott stated:
“Ignoring the concerns of Americans, small business owners, and stakeholders from across the country, Chair Gensler pressed forward with a final rule that falls outside his agency’s authority and does far more to advance the Biden administration’s far-Left climate agenda than uphold the SEC’s mandate to protect investors, maintain fair, orderly, and efficient markets, and facilitate capital formation. The last time I checked, the SEC is a securities regulator that does not employ climate scientists, and it clearly has acted without regard to the onerous burdens placed on businesses of all sizes – a blatant disregard that will harm Main Street the most. This is federal overreach at its worst, and as the lead Republican on the Senate Banking Committee, I intend to utilize the Congressional Review Act to fight this rule and protect economic opportunity for all Americans.”
Senator Scott notes that the SEC has pursued an aggressive regulatory agenda “with limited public comment periods and supported by inadequate cost-benefit analysis.”
Climate disclosure requirements will certainly create a new legion of consultants who will act to greenwash public firms to satisfy the SEC’s demands. The nebulous nature of the requirements makes estimating the cost incredibly difficult. At the same time, public firm disclosure will roll downhill as they demand their suppliers—some private—provide data so they can adhere to climate disclosure rules. The cost to the economy is impossible to estimate.