The SEC wants to know more about what companies are doing about climate change-Reuters

US Securities and Exchange Commission (SEC) Chairman Gary Gensler testified before a supervisory hearing on the SEC on September 14, 2021 at Capitol Hill, Washington. To do.

Evelyn Hoxtine | Swimming Pool | Reuters

The Securities and Exchange Commission wants to know more about what companies are doing to deal with climate change.

The SEC Commissioner will meet on Monday to propose rules for improving climate-related risk disclosure.

This is part of an ambitious regulatory agenda set by SEC Chairman Gary Gensler. Over 50 proposed rules are being considered by the SEC, one of the most ambitious regulatory programs in decades.

However, climate disclosure rules can be particularly controversial.

In a July 2021 speech, Gensler said, “Investors want to better understand the climate risks of companies that they own or can buy stock. Investors are consistent and comparable. So we are looking for information to help us make decisions, meeting their needs, “he said.

The SEC will announce details of the proposed rules late Monday morning. However, based on Gensler’s previous speech, these rules could be:

Request mandatory disclosure.. The United States does not have clear criteria for what companies should disclose to investors about climate risks. Gensler previously stated that climate disclosure should be “consistent and comparable.”

Must be submitted to the company’s annual report (Form 10-K). This will be displayed along with other information that investors use to make investment decisions.

Need qualitative and quantitative information.. Gensler has previously stated that quantitative disclosures may include information related to greenhouse gas emissions, the economic impact of climate change, and progress towards climate-related goals. The SEC may also seek to disclose “significant” climate risks for investors, such as risks caused by hurricanes, floods and droughts. Qualitative information can include how business owners manage climate-related risks and opportunities, and how these factors affect corporate strategy.

Require companies to substantiate their claims.. In the past, Gensler has pointed out that, for example, companies may claim to have “net zero” greenhouse gas emissions, but they do not provide any information to support that claim.

Gensler individually criticizes investment funds on the market as “green,” “sustainable,” and “low-carbon,” but it’s unclear which criteria they use to define themselves. .. Gensler said he wants fund managers to disclose the criteria and data they use to create these funds.

Expect pushback

Many companies have already acknowledged climate change, indicating that some have already wanted a transition to net zero emissions, a shift from many concerned about climate change. May encourage repulsion. About the SEC, climate change and many other issues.

In a statement to CNBC, Kenneth E. Bentsen, Jr., President and Chief Executive Officer of the Securities Industry Financial Markets Association (SIFMA), an industry group representing the assets of brokerage firms, banks and asset managers, said: It states as follows. ESG disclosure rules provide a balance between coordinated disclosure and comparable quantitative information between reporters while minimizing reporter compliance costs and ensuring a flexible disclosure regime that can respond to changing circumstances. I think I need to. »»

Many members of Congress are also worried about the spread of regulation.

In a statement to CNBC, US House of Representatives Andy Barr (R-KY), a prominent member of the House Financial Services Commission, who led the Republican Party’s rejection of the SEC’s climate disclosure regulation process last October, said: It states as follows. The Securities and Exchange Commission (SEC) aims to protect investors, maintain a fair, orderly and efficient market, and promote capital formation. It’s definitely not about reducing carbon emissions or solving climate change.

“But by interfering with unskilled environmental policy debates like climate change, the SEC politicizes government agencies, hurt investors, and makes non-monetary factors higher than economic gains. , Will reduce its credibility, “he said.

This is just the beginning of the process

The rules proposed by the SEC, if approved by the Commission, are only the beginning of the process.

As new rules are proposed, the public comment period will continue. This is 30 days or 60 days since it was recently published in the official bulletin, whichever is longer.

The SEC can then respond to comments, request additional comments, and propose final rules. You can then vote for the final rule and adopt it.

Getting to that final vote isn’t always easy, Amy Lynch, president of FrontLine Compliance and former SEC chief compliance officer, told me in February.

“We need an agreement with the SEC committee within the department responsible for this rule, which can be a very political process,” she told me. “The important thing is whether the proposal is in the minds of the majority. »»

SEC Chairman Gary Gensler will attend CNBC’s “Power Lunch” at 2:15 pm on Monday to discuss proposed climate disclosure regulations.