TheCorporateCounsel.net

Earlier this month, eighty Democrats from the U.S. House of Representatives sent a letter to SEC Chair Gary Gensler, urging him to “finalize and adopt a credible mandatory disclosure rule as quickly as possible.” The letter notes:

The proposed rule is squarely within the Commission’s authority and mission to protect investors; maintain fair, orderly, and efficient markets; and facilitate the formation of capital. The SEC has “longstanding and indisputable authority to regulate the disclosure practices of public traded companies” to protect markets and market participants. It “has exercised its disclosure authority consistently—and without legislative override” for over ninety years, and “has now done so once more with the Proposal on climate-related disclosure.”

Increasingly frequent and severe extreme weather events have affirmed that climate change poses a significant financial risk, and developments in the past year have strengthened the case for finalizing a strong rule. Physical risk is scaling rapidly, accelerating direct damages and supply chain disruptions that impact public companies’ bottom lines. Last year, the cost of climate and weather disasters in the United States totaled more than $165 billion—the third most costly year on record. 2These events can materially affect the financial and operational wellbeing of companies around the world, including SEC registrants. The current patchwork of voluntary reporting requirements is inadequate and lacks rigor, consistency, and verifiability.

The letter also cites the European Union’s implementation of its Corporate Sustainability Reporting Directive, “which will increase climate-related reporting requirements on companies within the EU and those that have substantial activity within the EU.” The letter indicates that “recent estimates show that thousands of U.S. companies will be required to comply with these CSRD standards.”

By my count, this letter joins a dozen other letters from members of the U.S. House Representatives in the SEC’s comment file for the climate change disclosure proposal. Thirteen letters have also been sent from U.S. Senators. This rulemaking has certainly generated a significant amount of interest from Capitol Hill in the almost year and half that the proposal has been outstanding. I cannot recall a rulemaking that prompted so many letters from members of Congress.

– Dave Lynn