June 14, 2021

Banking Committee Republicans to the SEC: Reject New Global Warming Disclosures

Congress—Not Financial Regulators—Are Tasked With Creating Environmental Policy

Washington, D.C. – U.S. Senate Banking Committee Ranking Member Pat Toomey (R-Pa.) and all Republican members of the committee are urging the Securities and Exchange Commission (SEC) to reject any proposal to implement new global warming disclosures.


In a letter to SEC Chair Gary Gensler and Commissioner Allison Herren Lee, the Senators wrote:


“We do not believe that any further securities regulations to specifically address global warming are necessary or appropriate, and will only serve to further discourage firms from becoming publicly traded, thus denying significant investment opportunities to retail investors.”


On March 15, 2021, then-Acting Chair Lee requested public input on the SEC’s disclosure rules and guidance as it relates to climate change and whether it should be modified.


The Senators argued that the push for more disclosure has little to do with providing material information for investment purposes and is instead an attempt to appease third-party stakeholders—including asset managers—at the expense of a company’s shareholders.


“…[a]ctivists with no fiduciary duty to the company or its shareholders are trying to impose their progressive political views on publicly traded companies, and the country at large, having failed to enact change via the elected government. These activists want to use climate change disclosure regimes to run costly pressure campaigns against firms to the detriment of shareholders.”


…


“Some asset managers and institutional investors who support a climate change reporting regime have their own conflicts of interest. For instance, climate change disclosures might facilitate efforts by asset managers to create higher margin environmental, social, and governance (ESG) products.”


The Senators also warned against trying to use a third-party standard setter in order to avoid compliance with the Administrative Procedure Act and the SEC’s commitment to conduct a robust cost-benefit analysis of new regulations.


The letter concludes by reminding the SEC that elected leaders in Congress—not unelected financial regulators—are responsible for weighing any potential policy changes.


“The SEC is an independent financial regulator, whose political insulation reflects its narrow focus on the financial markets. It does not have a mission of remaking society or our economy as a whole.


“Determining how to address global warming is a difficult process that involves weighing costs and benefits, making tradeoffs, and negotiating to reach political consensus. If our laws are inadequate to deal with climate change, then it is job of members of Congress—who are accountable to the voters through elections—to address them and not the SEC.”


To read the full letter, click here.