Democratic lawmakers are pressing the Securities and Exchange Commission not to scale back new climate disclosure regulations that are expected to be made public in the coming weeks.
Fifty congressional Democrats wrote to SEC Chair Gary Gensler on Sunday, urging the commission to “issue a strong climate risk disclosure rule as quickly as possible.”
The SEC released draft climate disclosure rules in March 2022. They would require corporations to report publicly on the greenhouse gas emissions generated by their business activities.
Led by Senator Elizabeth Warren, D-Mass., and Representative Dan Goldman, D-N.Y., the lawmakers argued that limiting the proposal in anticipation of possible legal pushback would be “deeply misguided.”
“It is increasingly clear that climate change and the clean energy transition will have significant impacts on companies’ costs and risks across industries,” the lawmakers wrote. “The SEC’s rule must push companies to take the necessary steps to issue those disclosures and prepare for that eventuality.”
A spokesperson for the SEC did not immediately respond to a request for comment.
The Democratic lawmakers urged the SEC not to revise certain language in the proposal that would require more companies to disclose climate-related financial risks. They also expressed support for provisions in the draft proposal that would require the reporting of Scope 3 greenhouse gas emissions.
Scope 3 emissions cover pollutants generated in a company’s value chain, including a category related to financing activities. A report last year from the consulting firm Bain found that financed emissions are underreported, and that they account for at least 95% of corporate emissions.
The Democratic lawmakers wrote that the possible “curtailing” of Scope 3 emissions disclosures is “deeply concerning.”
“The market demands this information, and it is the Commission’s job to provide it,” the letter states.
Critics of mandatory Scope 3 disclosures have argued that companies would have to rely on unstandardized and sometimes incompatible data sourced from third-party and portfolio firms. They have also pointed to the cost of estimating the difficult-to-calculate emissions category.
Banking industry groups are among those who have pushed back against requiring Scope 3 disclosures.
The Bank Policy Institute, a trade group representing large banks, said in a statement Monday that the SEC’s proposed reporting of Scope 3 emissions is “overly broad” and faces concerns about “practical limitations.”
“The proposed Scope 3 emissions disclosure requirements are overly broad and would not result in consistent, comparable or reliable disclosures,” the trade group said. “Data quality challenges limit Scope 3 emissions disclosures’ usefulness for investors. These indirect emission disclosures would muddy the waters rather than provide clarity for investors.”
In recent years, large banks have pledged to begin to implement processes to expand their reporting on Scope 3 emissions.
Last week, Citigroup published its new financed emissions disclosures for the auto manufacturing, commercial real estate, steel and thermal coal mining sectors. But Citi Chief Sustainability Officer Val Smith cautioned that a lack of comparable information from portfolio companies can limit the precise measurement of total emissions.
Most mid-size banks have yet to make financed emissions disclosures.
Last month, three Republican lawmakers wrote to Gensler requesting information related to the SEC’s climate disclosure proposal.
In the letter, Sen. Tim Scott, ranking member on the Senate Banking Committee, and Rep. Patrick McHenry, who chairs the House Committee on Financial Services, rebuked the SEC’s proposal and accused regulators of seeking “to advance progressive climate policies.”
“This sweeping rule exceeds the SEC’s mission, expertise, and authority and, if finalized in any form, will unnecessarily harm consumers, workers, and the U.S. economy,” the Republican lawmakers wrote.