On Tuesday, April 18, the House Committee on Financial Services held their “Oversight of the Securities and Exchange Commission” hearing with Securities and Exchange Commission (SEC) Chair Gary Gensler. The hearing covered topics from across the financial world, but also featured discussion on the SEC’s looming climate disclosure rule.
The hearing offered an open-floor opportunity for House members to ask Gensler whatever was on their mind. For Reps. Roger Williams (R-Texas) and Byron Donalds (R-Fla), the proposed climate disclosure rule was much of their topic of conversation during their time on the floor.
Rep. Williams called into question the specific impact that the proposed rule would have on both public and private companies:
“What is the SEC’s legal authority to enforce these climate-focused regulations and how does the SEC plan to ensure that its climate disclosure rule does not disproportionately harm smaller entities, which may lack the resources and expertise to comply with the rule’s reporting requirements?”
Gensler responded:
“Our authorities are only about the public registrants and we’re not placing any obligations on non-public companies, investors are making decisions based on this information, and we are not a climate regulator, we are neutral about that.”
To add icing on the cake, Rep. Donalds made a few key statements about the overarching legal authority for the SEC to enforce climate-focused regulations:
“Just because some companies are already [disclosing climate risks] does not mean you need to make sure that all companies are doing it. You don’t have the authority to make it uniform because [Congress] never gave you that authority.”
Donalds also scrutinized Gensler for his congressional overreach into an area that the SEC was never designated to have authority in:
“You are making the determination and definition [of climate disclosure] without Congressional authority.”
Gensler spent most of his rebuttal time restating that the “SEC is not a climate regulator” or “a climate policy agency,” proceeding to emphasize that the Commission is a “market regulator,” “a disclosure regulator,” and “a capital markets regulator.”
This hearing made it abundantly clear that the SEC should remain far away from its attempts to regulate climate disclosures. The SEC’s proposed rule would have more downfalls than benefits and would cause companies to be left with more questions than answers. The SEC should realize their continued overstep and stay away from regulating climate.