Proposed climate rule is bigger, badder deal than Manchin-Schumer climate bill | The Hill

SEC Chair Gensler will have an uphill job convincing courts that his proposed rule is a tidying-up exercise divorced from climate policy. The review that led to its creation was launched by SEC acting chair Alison Herren Lee in March 2021 with a statement declaring climate change and ESG front and center for the SEC because the agency can help drive sustainable solutions.

Two months later, President Biden signed an executive order on climate-related financial-risk disclosure ordering a whole-of-government approach to disclosures to achieve a target of net zero emissions by 2050. At the G-7 finance ministers meeting the following month, Treasury Secretary Janet Yellen signed a communiqué on greening the financial system to mobilize trillions of dollars needed to meet net zero commitments and supporting adoption of mandatory climate-related financial disclosures based on the TCFD framework.

Despite a mountain of evidence, the SEC states in the proposed rule (page 21380 of the Federal Register) that the objective of this disclosure is not to drive targets, goals, plans or conduct. More than being quite a distraction, to borrow the chief justice s words, the SEC s ostensible justification is clearly untrue. If implemented, it would give rise to disclosures that would systematically mislead investors about companies exposure to climate-transition risk, violating the mandate Congress gave the agency to protect investors. 

Climate-transition risk arises from laws and regulations that force companies to decarbonize their operations. The SEC claims as the principal benefit of the rule more efficient capital allocation because investors are better able to price climate-related risks. The tabulations of greenhouse gas emissions that companies must report represent their global total, emitted from anywhere in the world; the emissions are not disaggregated by country or jurisdiction. The policy therefore treats the globe as a single, homogenous regulatory space. The SEC knows this is false, as it recognizes that transition risk is jurisdiction-specific. 

These inescapable contradictions arise because the SEC has taken a sustainability reporting framework (the TCFD website says its framework is designed to empower the markets to channel investment to sustainable and resilient solutions, opportunities and business models ) and shoehorned it into a climate-risk justification. The shoe doesn t fit, but instead of admitting this, the SEC persists in a pretextual justification that the text in its own rule-making shows is a baseless fabrication. 

The SEC climate proposal demonstrates a fundamental truth: ESG is the pursuit of politics by other means. This incurs costs. 

via thehill.com