The Securities and Exchange Commission (SEC) has announced a change regarding rules enacted by the Commission during the Biden Administration that sought to target climate disclosure for reporting firms.
As part of the controversial ESG initiatives launched by the previous Chairman of the SEC, Gary Gensler, the Climate Rules approved were lambasted as going beyond the authority of the SEC, with some insiders deriding the agency as becoming the Securities and Environment Commission. The rules enacted by the Commission were deemed opaque and difficult to enforce, creating an expensive level of compliance while delivering nothing beneficial to investors. As the Climate Rules are entwined in litigation, the SEC deemed it prudent not to enforce the rules.
Acting Chairman Mark Uyeda said the Climate Rules are “deeply flawed and could inflict significant harm on the capital markets and our economy.”
Uyeda noted that both he and Commissioner Hester Peirce voted against the Climate Rules as it would “require a large volume of financially immaterial information, financially material climate-related risks were already subject to disclosure under existing rules, and the proposed rules overstepped the SEC’s regulatory authority.”
Democrat Commissioner Caroline Crenshaw challenged Uyeda’s justification for seeking the revocation of the rules. Crenshaw claimed that investors have been asking for “consistent, comparable, and reliable climate risk disclosures.” Crenshaw also believes the Commission has the authority to regulate climate issues – a highly political topic that divides the country. She described Climate Disclosure simply as another element of risk.
ESG investments offered publicly have receded in recent months as some firms offering impact-type investments have not seen sufficient demand from investors. Investors continue to seek securities based on expected returns, but still, options remain for impact or socially aligned investments.
Uyeda said that due to the change in Administration, he has directed the Commission staff to notify the Courts not to schedule the case for argument to provide time for the Commission to deliberate and determine the appropriate next steps in these cases.