House Republicans Don't Want Companies to Report Financial Risks From Climate Change

A GOP Working Group is taking aim at the SEC's climate protection proposals as a 'prime example' of government overreach.

ROB LENIHAN
FEB 7, 2023 2:06 PM EST

The climate isn't the only thing that's heating up.

A proposal by the Securities and Exchange Commission addressing climate protections is in the crosshairs of the Republican majority in the House, who have raised concerns about government overreach.

Under the SEC’s proposed climate disclosure rule, companies must provide an accounting of their greenhouse gas (GHG) emissions, the environmental risks they face, and the measures they’re taking in response.

"Today, investors representing literally tens of trillions of dollars support climate-related disclosures because they recognize that climate risks can pose significant financial risks to companies, and investors need reliable information about climate risks to make informed investment decisions," SEC Chairman Gary Gensler said on March 21.

The proposed rules would require disclosures on Form 10-K about a company’s governance, risk management, and strategy with respect to climate-related risks.

Moreover, Gensler said, the proposal would require disclosure of any targets or commitments made by a company, as well as its plan to achieve those targets and its transition plan, if it has them.

Republicans, who receive the vast majority of oil industry campaign contributions based on data compiled by Open Secrets, are not fans of the SEC proposals.

On Feb. 3, North Carolina Republican Patrick McHenry, Chairman of the House Financial Services Committee, announced the formation of a Republican Working Group “to combat the threat to our capital markets posed by those on the far-left pushing environmental, social, and governance (ESG) proposals.”

Republicans Warn of 'Far Left Ideology'

Rep. Bill Huizenga of Michigan, who will lead the group, cited last year’s Supreme Court ruling which found that congress must provide clear direction to the Environmental Protection Agency for the EPA regulate greenhouse gas emissions.

“The SEC’s climate disclosure rule is a prime example of this overreach- that would have a wide-ranging impact on hard working Americans across all walks of life," Huizenga said in a statement.

McHenry claimed that “progressives are trying to do with American businesses what they already did to our public education system—using our institutions to force their far-left ideology on the American people.”

“This group will develop a comprehensive approach to ESG that protects the financial interests of everyday investors and ensures our capital markets remain the envy of the world,” he said.

Amid the controversy, Gensler is considering scaling back the climate-risk disclosure rule, Politico reported, citing three people familiar with the matter. A primary concern is the wave of lawsuits that are expected to challenge the rule once it’s finalized.

One of the most contentious mandates would require certain large public companies report data about carbon emissions from their extensive supply chain networks and customers.

The SEC did not immediately respond to a request for comment.

"Investors deserve information that can help them assess the financial risks from #climatechange," Rob Schuwerk, North America Director of Carbon Tracker tweeted. "Now is not the time for @SECGov to weaken climate risk disclosure requirements."