US Securities and Exchange Commission (SEC) Chairman Gary Gensler testifies before the Senate Banking, Housing and Urban Affairs Committee during an oversight hearing on Capitol Hill in Washington, September 15, 2022.
Evelyn Hockstein | Reuters
WASHINGTON — SEC Chairman Gary Gensler hinted again Monday that the agency was considering reducing its emissions disclosure rule.
While Gensler said he didn’t want to “get ahead of the process” when asked about the possibility of scrapping so-called Scope 3 disclosures, he acknowledged that far fewer companies accounted for those releases and said the calculations weren’t as “good.” developed.”
The Securities and Exchange Commission proposed the rule a year ago that requires publicly traded companies to disclose their greenhouse gas emissions on a tier system: Scope 1 was direct emissions from operations; Scope 2 was indirect emissions from the purchase of oil, gas and other forms of energy; and scope 3 disclosures were much more obscure. The latter required companies to account for and disclose carbon dioxide emissions produced up and down the supply chain by external suppliers, vendors and partners.
“There are a lot more companies already disclosing Scope 1 and 2,” Gensler said during an interview with the Council of Institutional Investors on Monday. However, Scope 3 disclosures were not “as well developed,” he said.
“Again, I don’t want to preempt the staff’s recommendations, but I think even when we put forward the proposal, we took different approaches to the different levels of disclosure,” he said.
The SEC received a record 15,000 or so comments on the rule, “more than we’ve received on any other role in the history of our commission,” Gensler said. Any final rule will take that into account, he said.
“About a third of those are unique comments, weighing in on different aspects of the rule, whether it’s weighing in from the investor side or the issuer side,” Gensler said. “And just sort through them and see how we go.”
Gensler previously said the agency was considering making “adjustments” to the rule, given the volume of public comments.
he told CNBC in an interview last month it was customary for the agency to “review all of that, think through the economics, think through the legal authorities that commentators have raised. It’s pretty common to make adjustments.”
But a group of Democratic lawmakers is pushing Gensler not to drop Scope 3 disclosures from the final rule.
“Reports that the Commission may weaken or completely drop the Scope 3 emissions disclosure requirements in the final rule are particularly troubling,” says a March 5. mail addressed to Gensler from Sens. Elizabeth Warren, Massachusetts, and Sheldon Whitehouse, Rhode Island, and Representatives Dan Goldman, New York, and Jamie Raskin, Maryland.
The letter is also signed by 47 other Democratic lawmakers, who argue that companies could hide their true carbon footprint without disclosure in Scope 3.
“Without comprehensive Scope 3 emissions disclosures, companies could also simply transfer emissions-intensive activities to suppliers or downstream customers to appear cleaner without actually reducing their emissions or the resulting transition risk, or redraw their organizational boundaries so that subsidiaries they own and operate is not part of their consolidated accounting group, as is common for private equity firms,” they wrote.
The lawmakers said the changes the SEC put forward are partly due to an effort to avoid numerous lawsuits seeking to challenge the rule after it is finalized.
The US Chamber of Commerce, the largest corporate lobbying group in the United States, has repeatedly threatened to sue the agency to halt the climate-related disclosure rule. Republican lawmakers have also come out publicly against the rule, passed legislation in the House and Senate last week to repeal a related rule on ESG investments proposed by the Department of Labor. President Joe Biden said he would veto the bill.
But Gensler said his agency is committed to staying within the bounds of the law, esp the Administrative Procedure Actwhich govern final rulemaking processes, when deciding how to finalize the rule.
“That means technically looking at efficiency, competition and capital formation,” he said.
“We get input on economics, we get input on legal authority, we get input of course on policy,” Gensler added. “And then staff considers it, makes recommendations to the five-member commission … but it’s really staying within the law and how the courts interpret the law.”
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