The Securities and Exchange Commission’s (SEC) proposed climate disclosure rule continues to raise concerns among investors nationwide. In particular, 10 of the largest U.S. asset managers had much to say during the rulemakings public comment period.
In July, Morningstar Manager Research conducted an analysis of those key responses, finding that the majority do not support the mandatory disclosure of indirect greenhouse gas emissions (Scope 3), citing a “lack of maturity in measurement methods and an absence of materiality for many companies.”
Scope 3 emissions have been at the forefront of opposition to the proposed climate disclosure rule because of its inherently subjective nature. Reporting on a company’s indirect greenhouse gas emissions poses quite the challenge, as most companies lack the necessary resources to carry out the rule’s proposed reporting requirements.
The analysis also found that the majority of the asset managers had further concerns stating, “that aspects of the proposed rule deviate from the Supreme Court’s definition of materiality, with potential unintended negative consequences.” They argue that this discrepancy could impose requirements for companies who might not have anything “material” to report, creating not only a burdensome, but ultimately unnecessary step for companies to follow in the reporting process.
The voiced opposition to the SEC’s climate disclosure rule from our nation’s largest asset managers speaks volumes. Considering the significant concerns raised by experts in the financial industry after thorough analysis, the SEC should not move forward with this proposed rule without further study. Yet, the SEC continues its creep, overstepping and deviating from its congressional authority.