To: Interested Parties
From: Unlocking America’s Future
RE: The Congressional Review Act Resolution on SEC Climate Risk Disclosure Rule Will Fail
Date: April 8, 2024
The U.S. Securities and Exchange Commission (SEC) last month issued its final climate risk disclosure rule. After a two-year long comment period, greedy billionaires and corporate special interests failed in their efforts to preemptively kill the rule but quickly pivoted to employing desperate legal tools in a last ditch effort to overturn it.
Within just a few weeks of the final rule announcement, 22 attorneys general who have taken over $9 million collectively in campaign contributions from the oil, gas, and extractive industries filed three separate lawsuits. Seven special interest groups followed suit, including the U.S. Chamber of Commerce and the Texas Alliance of Energy Produces, filing three additional lawsuits.
In parallel on Capitol Hill, members of the House and Senate who are also in the pockets of polluting industries have yielded their political power to attempt to overturn the rule through the Congressional Review Act (CRA) – a legislative tool used by Congress to review certain federal agency actions.
In light of the mounting waves of attacks and despite the fact that new polling shows a majority of Americans, including 65% of Independents and 55% of Republicans, support the SEC’s rule, the SEC issued its own stay on the rule last week.
Nonetheless, the House Financial Services Committee, of which some of its members have taken over $5 million in campaign contributions from the oil and gas industry, has scheduled a hearing on a CRA resolution on Wednesday, April 10th.
Despite the escalating political attacks, this memo outlines why the CRA will ultimately fail. The benefits of the SEC’s climate risk disclosure rule and Americans’ broad, bipartisan support will take this rule over the finish line.
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 April 2022 Canada introduced mandatory climate disclosures for banks and insurance companies set to take effect in the beginning of 2024.
- 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.
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.
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.
- More than half of voters, including 52% of Republicans and 63% of Independents, oppose Congress putting limits on these kinds of disclosures.
- A majority of voters agree that financial managers should be allowed to consider environmental factors when making investing decisions.
