The U.S. Securities and Exchange Commission (SEC) is planning to scale back proposed rules mandating that companies disclose climate-related data alongside traditional financial reporting, after the agency was surprised by major blowback from affected groups, The Wall Street Journal reported Friday, citing people close to the agency.
The proposed rules, announced in March 2022, would require companies to include data about both the way climate change might harm their business and the affect that their business might have on the environment via greenhouse gas emissions, according to the SEC. However, the plan was criticized by companies, investors and lawmakers for implementing onerous reporting rules, and even the pared down regulations are expected to face legal challenges, the WSJ reported.
WASHINGTON, DC – OCTOBER 03: U.S. Treasury Secretary Janet Yellen speaks with Securities and Exchange Commission (SEC) Chair Gary Gensler (R) during a meeting with the Treasury Department’s Financial Stability Oversight Council at the U.S. Treasury Department on October 03, 2022 in Washington, DC. The council held the meeting to discuss a range of topics including climate-related financial risk and the recent Treasury report on the adoption of cloud services in the financial sector. (Photo by Anna Moneymaker/Getty Images)
The finalized version of the rules will likely require some climate disclosures, but would raise the threshold for climate costs that companies are obligated to report, the WSJ reported. While President Joe Biden will have difficulty pushing new climate legislation now that Republicans narrowly control the House of Representatives, the proposed climate rules are considered to be one of SEC Chair Gary Gensler’s signature policies. (RELATED: Back To Petroleum: BP Is Scaling Back Its Green Investments Amid Disappointing Performance)
While some companies view the rules as little more than simple transparency targets that they already report, others have argued that the new rules would require significant investment in accounting experts that could help their companies report this data, Reuters reported. Amazon has criticized the rules for being “extremely difficult, if not impossible” to fulfill because reporting on damages done to the climate by business and vice versa are inherently subjective endeavors, the WSJ reported.
The world’s largest asset manager, BlackRock, has also pushed back on the rules, arguing that they would result in “highly inaccurate disclosures” and create “burdensome compliance costs,” the WSJ reported. BlackRock has been an outspoken advocate for making environmental, social and governance (ESG) considerations when investing, clashing frequently with Republicans, and more recently with Democrats, over its commitment to the issue.
Gensler has faced bipartisan criticism for his agency’s oversight of cryptocurrency exchange FTX, according to Fortune. FTX collapsed in November, filing bankruptcy amid allegations that founder and CEO Sam Bankman-Fried stole billions from the exchange’s clients, allegations for which he now faces a range of charges from both federal prosecutors and the SEC.
The SEC declined to comment for this story.
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