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Memo

MEMO: Push for Congressional Review Act Resolution on SEC Climate Risk Disclosure Rule Is Wasting Taxpayer Resources

April 22, 2024

To: Interested Parties

From: Unlocking America’s Future

RE: Push for Congressional Review Act Resolution on SEC Climate Risk Disclosure Rule Is Wasting Taxpayer Resources

Date: April 22, 2024

The House Financial Services Committee last week held a markup where members moved H.J. Res 127 to a vote on the House floor, pushing ahead a new measure that would kill the U.S. Securities and Exchange Commission’s (SEC) climate risk disclosure rule. The 22-28 margin vote came hours after a coalition of investor networks managing more than $50 trillion in assets sent a letter to Congressional leadership urging them to reject the Congressional Review Act (CRA) challenge.

The Committee’s decision was a transparent attempt to appease the interests of the oil and gas industry, which has given over $5 million in campaign contributions to many of the members who voted to move H.J. Res 127 forward. The decision also flagrantly disregarded the demands of the American public – who overwhelmingly and across party lines support the SEC rule. In fact, new research shows that 71% of voters — including 85% of Democrats and 60% of Republicans — believe the federal government should require publicly traded companies and large corporations to publicly disclose data about their climate-related risks. 

Efforts to kill the SEC’s rule are not isolated to Capitol Hill. Within just a few weeks of the SEC’s final rule announcement in March, 22 attorneys general who have taken over $9 million collectively in campaign contributions from the oil, gas, and extractive industries filed three separate lawsuits against the SEC. Seven special interest groups have filed three additional lawsuits against the SEC as well, including the U.S. Chamber of Commerce and the Texas Alliance of Energy Producers. 

This memo outlines why the CRA will fail and how the SEC’s climate risk disclosure rule benefits transparency in the financial ecosystem, America’s presence on the global stage, and Americans trying to save for retirement – ultimately showing that these desperate efforts from self-serving politicians are a waste of taxpayer dollars and finite government resources. 

Overturning the SEC’s climate risk disclosure rule will be harmful to investors and transparency in America’s financial system. 

  • Investors need consistent, reliable, and comparable disclosures from companies to determine if companies are meeting stated climate commitments – doing so will subsequently protect the financial security of hard working Americans. 
  • There is strong industry support for the rule. After the SEC released its initial proposal, nearly 200 investment firms, nonprofits, and State Treasurers sent a joint letter reaffirming support for the rule and outlining imperatives for the standard transparency requirements. Table setting that “climate change poses a systemic risk to the economy,” the groups noted they believe the rule will “help companies and investors to understand, price, and manage climate risks and opportunities. These activities are at the core of efficient securities markets and are essential to ensuring a just and thriving economy that works for all people and communities.”
  • Global investment firm Franklin Templeton, which oversees more than $1.5 trillion in assets under management, issued its own statement of support following the proposed rule, reinforcing that if “information is the oxygen of financial markets, then the SEC has just provided a welcome blast of fresh air that can revitalise capital allocation for the benefit of all.”

Killing the SEC rule will put America behind our international peers and competitors – including China – that have established disclosure requirements.

  • In January 2023 the European Union’s Corporate Sustainability Reporting Directive (CSRD) entered into force, establishing new rules to ensure that “investors and other stakeholders have access to the information they need to assess the impact of companies on people and the environment and for investors to assess financial risks and opportunities arising from climate change and other sustainability issues.”
  • In an effort to keep up with global competitors ahead of the curb, China announced in February 2024 it would establish requirements for more than 400 companies to publish sustainability reports by 2026. 

Moving the CRA challenge forward threatens responsible investing broadly, which data shows is good for the economy. 

  • Research continues to show that sustainable funds have comparable, if not better, financial returns to traditional funds with less downside risk.
  • Nearly 80% of impact investors reported that their financial performance meets or exceeds their targets. 

Leveraging the CRA to kill the SEC’s rule is part of a broader effort to undermine responsible investing. These attacks endanger the financial well-being of everyday Americans. 

  • Research has consistently shown that attacks on responsible investing endanger the financial well-being of everyday Americans, especially in the form of higher taxes and lower returns on retirement savings. 
  • Think tanks have clearly shown how transparency has been the bedrock of America’s financial system, and that the “consequences of climate change are creating new and growing forms of financial risk that investors need to consider when choosing how to prudently allocate capital.”  Research groups have pointed out that America’s current voluntary disclosure environment is expensive for both issuers and investors, hindering decision-making and effective capital investments.
  • Research continues to show that sustainable funds have comparable, if not better, financial returns to traditional funds with less downside risk. Nearly 80% of impact investors reported that their financial performance meets or exceeds their targets. 

Americans overwhelmingly and across party lines support the SEC’s transparency requirement on climate, and they agree financial managers should be empowered with this information.

  • Two-thirds of voters (80% of Democrats, 65% of Independents, and 55% of Republicans) support the proposed SEC rule, and a majority of Americans support responsible investing.
  • A majority of voters agree that financial managers should be allowed to consider environmental factors when making investing decisions.