A group of Senate Democrats has offered suggestions on improving the Securities and Exchange Commission’s (SEC) proposed rules requiring public companies to make climate disclosures.
Among the recommendations, they call for the disclosure of climate-related political influencing activities via direct lobbying and membership in trade associations and other dark money groups. Further, they recommend a quantitative threshold for Scope 3 disclosure. Allowing registrants to determine the materiality of their Scope 3 emissions may lead to underreporting. In addition, they seek stronger requirements for sector-specific disclosures.
“Climate change represents a major financial risk for publicly traded companies,” U.S. Sen. Sheldon Whitehouse (D-RI) said. “One of the most powerful tools businesses have to fight climate change – and reduce their investors’ exposure to climate-related risk – is their political influence effort. Investors need to know if companies are engaged in behavior that is harming the planet and ultimately, their own bottom lines.”
Whitehouse was among several senators who signed a letter to SEC Chair Gary Gensler, along with Sens. Brian Schatz (D-HI), Elizabeth Warren (D-MA), Sherrod Brown (D-OH), Martin Heinrich (D-NM), Alex Padilla (D-CA), Tammy Baldwin (D-WI), and Jeff Merkley (D-OR).
“I strongly support the SEC’s proposed rule, which will finally give investors the information they need to assess companies’ climate risks and risk management strategies,” Schatz said. “The SEC’s mandate is investor protection, and the agency has the authority and the obligation to give the market the detailed, consistent, and comparable information it needs to allocate capital efficiently. This rule will crack down on corporate greenwashing by holding registrants accountable for their stated climate goals, and it will give investors reliable data to evaluate their portfolio risk exposure.”
In addition to the recommended improvements, the senators highlighted some areas that should remain in the final rule. Among them are the Scope 3 disclosure, the targets and goals disclosure, and the materiality threshold.
“The SEC’s proposed climate disclosure rule is powerfully important, providing consumers and investors with more knowledge about environmental risks and fossil fuel emissions,” Warren said. “But the rule must be strong enough to produce full and transparent disclosures, and we’re urging the SEC to make improvements and preserve key elements in the final rule.”