House Republicans challenge SEC’s power over climate disclosure rule
Republicans and Democrats engaged in a heated debate on Thursday over a proposal that would require companies to disclose climate change risks to the Security Exchange Commission (SEC). Under the proposed rule, companies would be required to provide information about climate-related risks that could impact their business operations or financial conditions in their registration statements and periodic reports to the SEC.
Samantha Jones, a senior attorney at the Environmental Defense Fund, explained that the disclosures would include important details such as whether a company’s key facilities are vulnerable to coastal flooding or if the company’s business model is compatible with the transition arising from changes in consumer demand or policy.
Republicans at the House Financial Services subcommittee hearing expressed concern over the SEC’s authority, describing the proposal as government overreach. Representative Bill Huizenga of Michigan argued that Congress had not delegated the authority to the SEC to require climate disclosures. He criticized the SEC for underestimating the costs of the rule and for being uncooperative on revisions.
However, House Democrats argued that the SEC was well within its authority and that the proposed rule would benefit investors. Representative Al Green of Texas called the proposal a necessary investor protection regulation, highlighting the increasing demand from investors for businesses to be transparent about climate change’s impact on their operations. He emphasized that providing climate-related risk information would help investors make informed decisions.
While Republicans claimed that climate disclosures were unnecessary and burdensome for businesses, Democrats believed that they were essential for accurately assessing potential risks. Representative John Rose of Tennessee expressed concern about the disregard for materiality in the proposed rule, stating that climate information was non-material and unnecessary for investors. In contrast, Representative Rashida Tlaib of Michigan argued that standardized and reliable climate-related information was imperative for protecting investments.
It is worth noting that many companies already report climate information voluntarily. Last year, California enacted two climate disclosure laws that require businesses operating in the state to disclose their emissions and financial risks related to climate change. Additionally, the United Kingdom has implemented mandatory climate-related financial disclosures for publicly quoted companies, large private companies, and limited liability partnerships.
Overall, this debate highlights the ongoing clash between Republicans and Democrats over the role of the SEC in requiring climate disclosure. While Democrats see it as an essential step towards protecting investments, Republicans argue that it exceeds the SEC’s authority and imposes unnecessary costs on businesses. As the discussion continues, the outcome of this proposal will have significant implications for the future of climate disclosure in the United States.
