Witnesses Criticize SEC Climate Disclosure Rule

At a House Financial Services Subcommittee Oversight hearing titled "Victims of Regulatory Overreach: How the SEC’s Climate Disclosure Rule Will Harm Americans," witnesses testified on the SEC's "aggressive" regulatory agenda, describing an "onslaught of rushed rulemaking." (See also, Majority staff Memorandum and related coverage.)

Oversight and Investigations Subcommittee Chair Bill Huizenga (R-MI) criticized the SEC’s climate disclosure rule for being too costly and being crafted on a "flimsy basis" without Congressional authorization. He criticized SEC Chair Gensler for ignoring legal warnings and the agency's inspector general, undermining the SEC's materiality standard and causing fear among stakeholders of SEC retaliation against anyone opposing the rule.

• Office of Tennessee Attorney General Director of Strategic Litigation Unit, Whitney Hermandorfer testified that the rule (i) lacked statutory authority, (ii) distorted "materiality" principles, (iii) imposed undue compliance and speech burdens and (iv) was issued under a flawed process. She underscored how the rule "fits into a pattern of agency overreach that harms States and their citizens."

• Jones & Church Farms, Inc. Co-Owner, Renea Jones argued that the proposed "Scope 3 emissions reporting requirements" under the rule would negatively impact her family farm. She highlighted the additional expenses that would be associated with compliance, for example, the hiring of legal consultants, chemists and additional staff to manage data the SEC would require. She also argued that farmers already comply with a number of government regulations from multiple federal agencies. She said the proposed Scope 3 emissions reporting would add another layer of regulatory burden.

• University of Tennessee, Associate Professor of Supply Chain Management, Alex Scott enumerated potential "drawbacks" of the rule, including, among others, (i) significant costs on businesses to develop systems for measuring, monitoring and verifying emissions; (ii) a lack of clear guidance on the exact procedures that companies should follow when reporting emissions; (iii) a questionable value of emissions reporting data and how such data will result in reduced emissions; (iv) a potential for increased outsourcing, potentially to less regulated entities, thus not reducing overall emissions and (v) the potential that reporting burdens could make the option of remaining or becoming a private company more attractive, reducing the number of public companies subject to SEC rules.