Dozens of Democratic lawmakers are stepping up pressure on SEC Chair Gary Gensler to push ahead with a landmark climate risk disclosure rule that’s facing fierce opposition from Wall Street to Washington.
Led by Sens. Elizabeth Warren and Sheldon Whitehouse, as well as Reps. Jamie Raskin and Dan Goldman, more than 50 lawmakers urged Gensler in a letter that was shared with POLITICO to not back down on a proposal to force companies to disclose information about their carbon footprints. The proposal would cover, in some cases, the greenhouse gas emissions generated by companies’ vast networks of suppliers and customers, known as Scope 3.
POLITICO previously reported that Gensler has considered scaling back the Scope 3 requirement — the rule’s most contentious feature because it’s so sweeping — over concerns about a wave of litigation that is likely to hit the SEC once the rule is finalized. The Wall Street Journal has also reported that the agency is weighing whether to pull back on another financial reporting component of the rule given the coming courtroom fights.
The lawmakers say investors are demanding the information — and that Wall Street’s top regulator needs to “issue a strong climate risk disclosure rule as quickly as possible.” They called the idea of preemptively curtailing the rule’s Scope 3 and financial reporting components to head off legal risks “deeply misguided.”
“The proposed rules are necessary and overdue,” they wrote to Gensler on Sunday, adding that if the SEC waters down the plans the agency “would be failing its duty to protect investors.”
Among the others who signed the letter are Sens. Martin Heinrich of New Mexico, Jeff Merkley of Oregon, Tina Smith of Minnesota and Cory Booker of New Jersey. Democratic Reps. Jerry Nadler of New York, Katie Porter of California and Chuy García of Illinois also signed on, as did Sen. Bernie Sanders of Vermont, an independent.
Asked for comment, an SEC spokesperson said in an email that Gensler “responds to Members of Congress directly rather than through the media.”
Now nearly a year old, the SEC’s proposal has ignited a firestorm in corporate America and among GOP lawmakers. But the Democratic concerns from Capitol Hill about the rule’s future are an early sign of the pushback that the SEC will have to face from the left if the agency elects to ease up.
The final rule will need to be approved by three of the SEC’s five commissioners, including Gensler.
Driving the proposal is the SEC’s hope of providing investors with a glimpse — through standardized data and disclosures — into how companies are tackling climate change.
The threat of litigation has hung over the SEC for months, as industry groups like the National Association of Manufacturers and several state attorneys general have warned that they may look to challenge the rule in court and on the grounds that the SEC overstepped its authority with the rule — especially in looking to include Scope 3 emissions.
Democrats see Scope 3 as pivotal to the final rule’s success.
“Not requiring Scope 3 emissions disclosures would enable [fossil fuel companies] and other companies with similar types of emissions patterns to hide the vast majority of their exposure to climate risk from regulators and investors,” the lawmakers wrote. “For many companies and sectors, a greenhouse gas inventory that omits Scope 3 would be materially misleading to investors.”