WASHINGTON — SEC Chair Gary Gensler hinted again Monday that the agency was considering scaling back its emissions disclosure rule.
While Gensler said he didn’t need to “get ahead of the method” when asked about the potential of discarding so-called Scope 3 disclosures, he acknowledged that far fewer corporations accounted for those emissions and said the calculations weren’t as “well developed.”
The Securities and Exchange Commission proposed the rule a 12 months ago requiring publicly traded corporations to reveal their greenhouse gas emissions on a tiered system: Scope 1 were direct emissions from operations; Scope 2 were indirect emissions from purchasing oil, gas and other types of energy; and Scope 3 disclosures were much more nebulous. The latter required firms to account for and disclose carbon emissions produced up and down the provision chain by outside vendors, suppliers and partners.
“There are much more corporations which might be already disclosing Scope 1 and a couple of,” Gensler said during an interview with the Council of Institutional Investors on Monday. Scope 3 disclosures, nonetheless, weren’t “as well developed,” he said.
“Again, I don’t desire to get ahead of staff recommendations, but I feel even once we made the proposal, we took different approaches to different levels of disclosure,” he said.
The SEC received a record 15,000 or so comments on the rule, “greater than we have gotten on another role within the history of our commission,” Gensler said. Any final rule will take that into consideration, he said.
“A couple of third of those are unique comments, weighing in on different facets of the rule, whether it’s weighing in on from the investor side or the issuer side,” Gensler said. “And it’s just sorting through those and seeing how we move forward.”
Gensler has previously said the agency was considering making “adjustments” to the rule, given the quantity of public comments.
He told CNBC in an interview last month it was customary for the agency to “review all that, think through the economics, think through the legal authorities that commenters have raised. It’s quite customary to make adjustments.”
But a bunch of Democratic lawmakers are pressing Gensler to not drop Scope 3 disclosures from the ultimate rule.
“Reports that the Commission may weaken or altogether drop Scope 3 emissions disclosure requirements in the ultimate rule are particularly concerning,” states a March 5 letter addressed to Gensler from Sens. Elizabeth Warren, of Massachusetts, and Sheldon Whitehouse, of Rhode Island, in addition to House Reps. Dan Goldman, of Latest York, and Jamie Raskin, of Maryland.
The letter can also be signed by 47 other Democratic lawmakers, who argue that corporations could hide their true carbon footprint without Scope 3 disclosures.
“Without comprehensive Scope 3 emission disclosures, corporations could also simply offload emissions-intensive activities to suppliers or downstream customers to seem cleaner without actually lowering their emissions or the resultant transition risk, or redraw their organizational boundaries so subsidiaries that they own and operate should not a part of their consolidated accounting group, as is common for personal equity firms,” they wrote.
The lawmakers said the changes floated by the SEC are partly out of an try and avoid quite a few lawsuits geared toward difficult the rule after its finalized.
The U.S. Chamber of Commerce, the most important business lobbying group within the U.S., has repeatedly threatened to sue the agency to stall the climate-related disclosure rule. Republican lawmakers even have publicly come out against the rule, passing laws within the House and Senate last week to overturn a related rule on ESG investing proposed by the Labor Department. President Joe Biden said he would veto the bill.
But Gensler said his agency is committed to staying throughout the boundaries of the law, particularly the Administrative Procedures Act, which governs final rulemaking processes, when deciding on find out how to finalize the rule.
“It means technically efficiency, competition and capital formation,” he said.
“We get input on economics, we get input on legal authority, we get input in fact on policy,” Gensler added. “After which staff considers it, makes recommendations as much as the five-member commission … nevertheless it’s really staying throughout the law and the way the courts interpret the law.”