The Security and Exchange Commission appears ready to quash the controversial climate disclosure rule, which will end the legal challenges that have been dropped on it. [emphasis, links added]
Acting Chairman Mark Uyeda, designated to the position by President Donald Trump, recently announced he’s taking action, arguing it’s “deeply flawed” and has the potential to “inflict significant harm.”
The rule, adopted in March, requires public companies to disclose their corporate climate risks and targets and how they plan to manage those risks.
This includes reporting the companies’ Scope 1 and Scope 2 emissions and how they plan to implement climate goals.
Scope 1 emissions are those that come directly from a company’s operations and Scope 2 emissions are those that come from their purchase of electricity, heating, or cooling.
While the commission didn’t adopt the more stringent requirement of disclosing Scope 3 emissions, which require public companies to calculate and report emissions that occur throughout the entire supply chain of a product, critics say compliance with the rule is costly, the requirements are unnecessary, and the rule exceeds the commission’s authority.
“The SEC was claiming a limitless power to require disclosures on anything and everything, just because some politically activist investors might say they want that information for social or political reasons, as opposed to purely financial calculus,” Luke Wake, attorney for the Pacific Legal Foundation (PLF), a public interest law firm, told Just the News.
‘Shaming’ Companies
The rule faced a barrage of lawsuits from interest groups, trade associations, and 43 states. The challenges were consolidated in the Eighth Circuit, and the SEC announced in April it would not implement the rule while the legal challenges played out.
The PLF represents the Texas Alliance of Energy Producers and the Domestic Energy Producers Alliance in their suit seeking to block the rule.
Wake said that the rule’s disclosures would have effectively shamed companies for not pursuing climate goals.
While the SEC couldn’t force companies to adopt such goals, Wake said the rule would have given the commission a means to pressure companies into it.
The rule would create an enormous administrative burden, critics also charge.
Companies would need to report what systems they have in place to monitor and respond to all kinds of climate risks, including speculative concerns about regulatory changes or changes in consumer behavior.
Critics also argue these risks must be disclosed even if they aren’t material to investors.
The rule would also impact non-public companies.
For example, a small entity contracting with a publicly traded company may have had to account for its greenhouse gas emissions to be included in the public company’s disclosures.
The costs of the disclosures would have been passed down to consumers.
Read rest at Just The News
