SEC Climate Disclosure Rule Will Cause Big Problems, CEI Experts Predict

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Today the Securities and Exchange Commission described a new rule it plans to impose concerning climate disclosure requirements that may affect even private companies as well as publicly traded ones. CEI experts warned of serious problems this mandate will create. (See: Statement on the Securities and Exchange Commission’s Open Meeting of March 21, 2022: “The Enhancement and Standardization of Climate-Related Disclosures for Investors”)

Richard Morrison, CEI Research Fellow:

“The Securities and Exchange Commission’s plans for new climate disclosure requirements, as described in today’s open meeting, is a problematic and misguided expansion of the agency’s traditional authority.

“The SEC claims that focusing on climate-related risk is about protecting investors, but that is clearly a secondary concern. The real goal is to create a framework by which corporations can be pressured, threatened, and cajoled into adopting operations consistent with the political demands of climate change activists. New disclosure requirements will be expensive and complex and generate greater legal risk for public companies. Shareholders will shoulder those costs.

“The majority of the commissioners today emphasized the need for a single, unified system for tracking and disclosing climate-related information. That is a mistake, because what capital markets need is a competitive, evolutionary process for information discovery that can only exist with multiple, competing frameworks that firms can join or leave voluntarily. If environmental, social, and governance (ESG) investing is really about creating value for investors rather than mandating progressive policy goals, competition is essential to high quality outcomes, as it is in the market for any other product or service.”

Wayne Crews, CEI Vice President for Policy and Senior Fellow:

“Governmental promotion of ESG is a policy setting the stage for future economic downturns. Rather than ESG making companies more profitable, profitable companies spend more money on ESG and divert shareholder money to enhance public reputation.

“Rooted in hobbling domestic fossil energy development rather than the promotion of high-BTU energy abundance and resilience, Biden’s whole-of-government climate campaign is embraced by departments and agencies well beyond the SEC, in a lockstep obedience to the gods of energy poverty that now comprises an industry unto itself.”

John Berlau, CEI Senior Fellow & Director of Finance Policy:

“As with the costly mandates of Sarbanes-Oxley and Dodd-Frank, this burdensome regulation will further discourage companies from going public or staying in the public markets. As a result, small entrepreneurs will lose opportunities to raise capital and middle-class investors will lose opportunities to build wealth.”

Myron Ebell, Director of CEI’s Center on Energy and Environment:

“The SEC’s proposed rule on disclosing climate-related risks is more evidence that the greater risk to corporate profits comes from destructive climate policies rather than the effects of climate change itself. The SEC rule would use regulations to guarantee that the political interests of massive activist investment funds, such as CalPERs and BlackRock, take precedence over the interests of those shareholders still interested in return on investments.”

Related analysis:

Expect Big Pivot from SEC on Climate, ESG