At Hearing, Senate Democrats Step up Calls for SEC to Wrap up Climate Rules

Senate Democrats on Sept. 12, 2023, stepped up pressure on SEC Chair Gary Gensler to wrap up the commission’s sweeping climate risk proposal issued a year-and-a-half ago. In testimony before the Senate Banking Committee, Gensler insisted the commission is not working “against the clock” on rulemakings.

The hearing, which marks Gensler’s first appearance before the banking panel in a year, comes as the SEC is working to finalize its proposal in Release No. 33-11042, The Enhancement and Standardization of Climate-Related Disclosures for Investors, later this year.

The proposal, which has drawn thousands of public comments, would require public companies to make detailed disclosures on both greenhouse gas (GHG) emissions and climate risk. Among other requirements, registrants would need to disclose separately Scope 1 direct emissions and Scope 2 emissions, those that stem from energy consumed by the company. A registrant would need to disclose its Scope 3 emissions – all those indirect emissions that fall outside of Scope 2 – if that information is deemed material, or if it has set emissions goals that include Scope 3 emissions.

The proposal’s critics, including some Democrats like Senator Jon Tester of Montana, have zeroed in on the Scope 3 requirement and how it could add reporting burdens to private companies within public companies’ supply chains. The SEC is widely expected to scale back parts of the proposal before finalizing it.

During the hearing, Senate Banking Chairman Sherrod Brown of Ohio, Senator Elizabeth Warren of Massachusetts and Senator Tina Smith of Minnesota all pushed Gensler on finishing the rules.

“I’m eager to see SEC finalize its climate disclosure rule,” Brown said. “There has been significant opposition to the proposal, who would have expected otherwise, but the transparency it will provide will be valuable to investors.”

Warren said Gensler has “a mandate to protect investors, you have strong public support to do this.”

“And I just want to say it is time for you to get this job done,” she said.

Smith cited parallel climate disclosure standards moving forward in the U.K. and European Union and from the International Sustainability Standards Board (ISSB), and asked about the role of U.S. leadership on the issue and what level of urgency he felt to complete the rulemaking.

“It’s really about bringing comparability and consistency to that which is already happening, that many U.S. issuers are already disclosing climate risk information and investors are making investment decisions,” Gensler said, while stopping short of offering a timeline for final rules.

“I don’t want to predict on this one. This is a very heavy comment file,” Gensler later added, citing issues raised around Scope 3 disclosure requirements and “a number of other matters as well.”