UPDATED: 27 SEP 2023 02:04 PM EST
Sen. Elizabeth Warren is stepping up the pressure on SEC Chair Gary Gensler to push out a strong climate risk reporting rule, saying voluntary disclosures by Wall Street firms can’t be trusted.
In the Massachusetts Democrat’s latest plea for the agency to finalize the landmark proposal, Warren pressed Gensler on Tuesday to stand by the SEC’s plans to require that certain public companies report data on the greenhouse emissions generated throughout their supply chains — so-called Scope 3 emissions — along with other disclosures. The rule would cover most publicly traded companies in the U.S., including many private equity firms, which Warren says are failing to properly tally the climate risks tied to their investments.
She led the letter with Reps. Rashida Tlaib (D-Mich.), Jamie Raskin (D-Md.) and Adam Schiff (D-Calif.).
“Finalizing a rule without these components could create a regulatory green light for public companies to disclose misleading [greenhouse gas emissions] and transition plan information that systematically understates their transition risks,” the lawmakers wrote in the letter, which was shared with POLITICO.
The SEC did not immediately respond to a request for comment.
Others who signed on include Sens. Sherrod Brown (D-Ohio), Tina Smith (D-Minn.) and Rep. Ayanna Pressley (D-Mass.). In total, 26 Senate and House Democrats — as well as Sen. Bernie Sanders (I-Vt.) — signed the letter.
The letter is the latest sign of mounting anxiety among Democrats and investor advocates about the fate of the SEC’s proposed rule.
The agency’s climate risk proposal, offered a year and a half ago, is one of the most contentious efforts underway at the Wall Street regulator to crank up supervision of public companies. When it’s finalized, the rule would help usher in a new age of corporate transparency on climate risk — an issue that investors have grown increasingly concerned about in recent years. But the rule is expected to face a barrage of lawsuits questioning whether the agency is overstepping its authority.
Democrats have become more vocal in their calls for the SEC to finalize the rule with many of the proposal’s features intact. The agency has indicated that it could advance the rule as soon as this fall, though a looming government shutdown could push that timeline further out.
In a recent interview, Warren, who co-led a similar letter in March, said she is alarmed by the delays.
“When Gary Gensler came before our committee as a nominee to head the SEC, he said — quite forthrightly — that American investors have a right to know about the climate risks facing companies they might invest in,” said Warren, a member of the Senate Banking Committee. “We’re two and a half years later, and still, no [rule is] on the table.”
“The SEC needs to do its job and stop trying to weaken its own regulations,” Warren said when asked about the legal threats facing the agency. “It needs to stop fighting with itself and just put out the regulations they think are right. And when they get sued, go defend it in court.”
Scope 3 emissions, which track those generated by suppliers and customers, have become a focal point in the debate over the SEC’s rule. Some like Warren have urged the agency to stick with the proposed requirements, pointing to the significance of those emissions in companies’ total carbon footprint.
In the letter, the lawmakers highlighted data from Ceres, a sustainability group, showing that 97 percent of institutional investors with more than $50 trillion in total assets under management support the proposed Scope 3 requirements.
The lawmakers said there have been signs of “significant inadequacies” in financial firms’ greenhouse gas emission disclosures and in their climate pledges. They called out private equity firms for appearing “particularly prone to understating their [greenhouse gas] emissions and presenting misleading climate-related claims to investors.”
Gensler has signaled that changes are coming in the final rule, though he hasn’t said what they could entail. He told lawmakers on Wednesday that the agency is trying to bring "some comparability" to public companies' climate risk disclosures but that Scope 3 can be "less developed."
"We at the SEC have to stay within our remit and the law," Gensler later added.
In the meantime, he says the agency’s work is being driven by “putting investors and issuers first” and not “the clock.”
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