To: Interested Parties
From: Unlocking America’s Future
RE: Forthcoming SEC Climate Disclosure Ruling Is an Important Step
Date: February 29, 2024
The U.S. Securities and Exchange Commission (SEC) in March 2022 issued a proposed rule that would require publicly traded companies to disclose information about greenhouse gas emissions. In the two years since, opponents have mobilized to try to kill the rule. Greedy billionaires and corporate special interests have engaged trade associations – primarily the Chamber of Commerce and the American Petroleum Institute – and lobbied members of Congress they have showered with nearly $60 million to avoid disclosure.
Despite these efforts, the SEC is taking an important step to ensure companies disclose information regarding greenhouse gas emissions. Establishing climate disclosure requirements is critical for a resilient American financial system in the 21st century and in an increasingly globalized economy.
As we await the full details of the rule, this memo outlines the benefits of a climate disclosure rule and the latest research showing Americans’ broad, bipartisan support.
Investors demand and deserve reliable risk-related disclosures from companies.
- 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.
- Shortly 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.”
- Just a few days after the SEC released the proposed ruling, global investment firm Franklin Templeton, which oversees more than $1.5 trillion in assets under management, issued its own statement of support. The firm noted that “to direct private capital to address the complex and daunting challenges of the energy transition, climate risk disclosure needs to be standardised, mandatory and regulated in the same way as financial reporting to ensure it is timely, accurate, complete and verified…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.”
Without the SEC disclosure rule, America will fall behind countries – 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.
The attack on the SEC disclosure 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.
- A report from The Brookings Institution outlined how transparency has been the bedrock of America’s financial system, and argued 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. Instituting the SEC’s proposed climate disclosure ruling, they argue, would improve the reliability and quality of the disclosures more broadly.
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.
