Last week, the House Financial Services Committee held a hearing titled, “Beyond Scope: How the SEC’s Climate Rule Threatens American Markets.” The hearing examined the impact that the Securities and Exchange Commission’s (SEC) final 885-page rule, requiring public companies to release climate-related disclosures that track Scope 1 and 2 emissions, would have on the American economy across industries. Ranging from small business capabilities to increased foreign reliance, the potential impacts and consequences of the rule were thoroughly discussed.
With experts such as former SEC chairs, acclaimed professors in law and economics, along with an energy producer CEO, the panel offered insight to better understand the detrimental impacts the climate rule will have on both investors and companies.
Rep. Bill Huizenga (R-Mich.) expressed the difficulty facing small business owners in his Southwest Michigan district, specifically due to the unclear, or rather, overwhelming requirements, implemented into the rule:
“The rule is still unworkable, no matter how much spin my Democrat colleagues put on it. And in the two years since the climate disclosure was proposed, we have seen a deluge of new rules and an unprecedented assault on our capital markets. The Commission finalized the climate rule despite no clear authorization from Congress to do so.”
Liberty Energy CEO Chris Wright critiqued the SEC’s climate disclosure rule for weakening American natural gas producers through costly reporting requirements, ultimately leading to an increase in foreign gas consumption by the U.S.:
“Two results can be expected, higher costs for US consumers and businesses, and increased oil imports, outsourced oil production to foreign adversaries like Iran, Russia, and Venezuela.”
Vanderbilt University professor Joshua T. White expressed explicit concern over the financial burden the new rule would have on companies, both big and small, and how the SEC dramatically undercalculated the fiscal burden that will be placed on them:
“The SEC readily admits they will substantially raise the direct costs of a public company. The spillover could also have widespread economic consequences, potentially leading to companies exiting public markets or choosing to remain private.”
According to the SEC’s own calculations, the average firm will pay an extra $864,000 for the mandated disclosures.
With each passing day, the harmful impacts of this ruling come to light as strains are placed along the value chain, from long-established companies down to the consumers this is supposed to protect. The detrimental impacts on small businesses and weakening American natural gas production demonstrates that the SEC needs to not only rescind the ruling, but dramatically reconsider the aggressive overreach of its own agency over the years.