House Hearing on SEC Climate Rule
April 16, 2024
The House Financial Services Committee (HFSC) held a hearing on April 10 titled “Beyond Scope: How the SEC’s Climate Rule Threatens American Markets.”
Why it matters: This climate regulation hearing is the latest salvo from conservative lawmakers against the Securities and Exchange Commission’s (SEC’s) climate disclosure rule.
- Committee Republicans described the rule as SEC overreach, arguing that it deviates from the materiality standard and could potentially harm businesses by mandating costly and burdensome disclosures.
- Democrats stated that climate risk is undeniably material and is necessary to protect investors.
Lawmakers also discussed the exclusion of Scope 3 (related to an organization’s value chain) emissions disclosure requirements from the final rule.
As covered in previous CREFC Policy and Capital Markets Briefings, at least nine lawsuits have been filed against the SEC’s climate disclosure rule and consolidated in the Eighth Circuit Court of Appeals pending litigation.
On April 4, the SEC issued a stay on the rule to avoid regulatory uncertainty if registrants “were to become subject to the Final Rules’ requirements during the pendency of the challenges to their validity.”
Unfortunately, attempting to reduce regulatory uncertainty is likely impossible at this point, regardless of what transpires with the SEC rule.
- In the two years since the SEC issued the proposal, California passed more stringent climate disclosure laws, with related regulations likely proposed in the coming year.
- Additionally, U.S. organizations that do business in Europe also have tougher standards with which to comply. For example, under the EU’s Corporate Sustainability Reporting Directive, U.S.-headquartered companies doing business with EU companies may have to include Scope 3 emissions reporting.
- Finally, the International Sustainability Standards Board’s (ISSB’s) extensive climate disclosure requirements are being adopted by more and more countries.
CREFC will continue to monitor regulatory and legislative developments related to climate regulation.
Please contact Sairah Burki (sburki@crefc.org) with any questions.