Gensler Caught in Partisan Crosshairs
March 13, 2023
Climate disclosure saga continues. As reported in several CREFC Policy and Capital Markets Briefings, the Securities and Exchange Commission (SEC) continues to deliberate climate risk disclosure requirements. According to the Biden Administration’s Unified Regulatory Agenda, the SEC is expected to release the final rule in April 2023, more than a year after the proposal was issued. See here for CREFC’s response to the proposal.
Why it matters. The forthcoming climate disclosure proposal requirements will ask for significant changes to financial reporting for many public companies. Two potential disclosure requirements are particularly controversial:
- Emissions data: Scope 1 emissions (related to the energy purchased by a company), Scope 2 emissions (related to a company’s own activities), and Scope 3 emissions (from a company’s upstream and downstream partners) data. Scope 3 requirements could be particularly difficult for many companies and their supply chain partners; and
- Financial statement disclosure of the impact from climate-related events and activities.
Partisan divide. The proposed disclosures face vigorous opposition from the GOP, with House Financial Services leadership stating they will request Gensler to appear before the committee in the near future. On the other side of the aisle, as reported by Politico, more than 50 Democratic lawmakers sent Gensler a letter urging him to press ahead with the disclosure requirements, including Scope 3 emissions data.
SEC weighs litigation. The SEC has received over 15,000 comments on the climate disclosure proposal and has indicated it is weighing them carefully in light of potential litigation, particularly as it relates to Scope 3 emissions requirements. In the interview with Politico, Gensler stated: