On July 12, the House Financial Services Committee held a hearing titled, “Protecting Investor Interests: Examining Environmental and Social Policy in Financial Regulation.” The hearing was held to discuss ongoing measures by regulatory agencies to mitigate climate impact and the ways regulations of such an area would be potentially detrimental for investors.
Experts in the industry and the topic were asked to give testimony including Honorable Keith Ellison, State of Minnesota Attorney General; Ted Allen, Society for Corporate Governance Vice President; Lawrence Cunningham, Mayor Brown Special Counsel; Ben Zycher, American Enterprise Institute Senior Fellow; and James Copland, Manhattan Institute Senior Fellow and Director.
Dr. Ben Zycher (American Enterprise Institute Senior Fellow) critiqued the Securities and Exchange Commission’s (SEC) proposed climate disclosure rule:
“Current proposals by financial regulators to force the private sector to implement climate policies in the form of measurement and reductions in greenhouse gas emissions would create severely adverse impacts while engendering climate effects literally equal to zero. The most prominent of these is the SEC proposed rule for “The Enhancement and Standardization of Climate-Related Disclosures for Investors,” mandating that public companies estimate their greenhouse gas emissions defined broadly, and analyze the “risks” that their emissions might pose to their current and future investors. Such disclosures would not be material, in particular because GHG emissions from a given firm, however broadly defined, cannot possibly have measurable climate effects, and thus would have no impacts on prospective returns to investments in that firm. Moreover, no firm or industry is capable of analyzing the effects of GHG emissions on climate phenomena generally or in particular on a geographic or sectoral basis.”
James Copland (Manhattan Institute Senior Fellow and Director) also pointed out the legal flaws associated with the current state of the Commission’s proposed rule:
“In a Q&A with members of Congress, Copland argued that the SEC climate disclosure rule raises implications under the Major Questions Doctrine and the Supreme Court could ultimately find the rule doesn’t pass legal muster for the same reasons as the EPA’s Clean Power Plan from the West Virginia vs. EPA decision last year.”
Several Republican members raised concerns over the SEC exceeding its regulatory authority to impose mandatory climate disclosures, including Chairman Patrick McHenry (N.C.), Subcommittee Chairman Bill Huizenga (Mich.), Reps. Andy Barr (Ky.), Bryan Steil (Wisc.), and Ann Wagner, (Mo.).
Notably, Democratic Congressman David Scott (Georgia) expressed concern about the requirement of Scope 3 emissions disclosures and its implications for small family farmers and ranchers in Georgia:
“98% of all of our farms in the U.S. are independent, family-owned operations that do not have the financial resources to track and report the emissions data necessary to meet this Scope 3 disclosure requirement. I hope that Mr. Gensler would not implement this Scope 3 situation; we need to carefully look at the impact it has in our agricultural community.”
As the proposed rule’s deadline gets closer, evidence and opposition continues to grow, emphasizing and uncovering a plethora of reasons as to why the Commission should rescind its proposed rule. From legal challenges to detrimental impacts on valuable investors and small businesses, to an overstep of their statutory authority, it is even more apparent that the SEC should make this proposed rule a thing of the past.