Team Biden’s Endless Campaign to Make Energy Expensive Former SEC officials blast the agency’s effort to enact environmental rules. By James Freeman
“Higher costs and more resources devoted to unproductive activity. Sounds like the perfect slogan for the president’s re-election campaign.”
Every week it seems the White House has a new political gimmick intended to suggest opposition to high gasoline prices. But beneath the public relations, voters should observe the broad administrative campaign to make energy more expensive. As if Washington doesn’t already have enough environmental regulators, Biden appointees with no expertise on the subject and no authorization from Congress are attempting to enact climate rules that don’t even appear to be legal. That’s the warning from former leaders of the Securities and Exchange Commission, who must be wondering what on earth has become of the capital markets overseer they used to run.
Last week this column noted the pushback from Senate Republicans to a pending SEC rule that would impose on companies of all kinds vast new reporting requirements on global-warming risks. This is the Biden whole-of-government approach to discouraging the use of fossil fuels, forcing companies to publish more data that may have no impact on profitability but will be useful for climate activists seeking to attack business. Now in a new letter to the commission, former SEC chairmen Richard Breeden and Harvey Pitt and former SEC commissioners Philip Lochner, Richard Roberts and Paul Atkins explain how the pending rule would pollute company reports with politics:
The Commission has long limited disclosure obligations to material information, in order to give investors what they need without inundating them with useless or irrelevant information… information about greenhouse gas emissions will fail in many cases to provide investors any basis for a reasonable prediction about expenses that companies will face from future statutory, regulatory, and public opinion changes… Moreover, disclosure of the effects of “physical” and “transition” risks—risks that are largely if not entirely speculative—on each line item of a registrant’s financial statements to a 1% threshold seems almost a perfect example of the “avalanche of trivial information” the Supreme Court cautioned could “bury investors” and thus impede their informed decision-making…
This perhaps explains why the Proposal does not hide the fact that its purpose is not to elicit financially material information. Indeed, the Proposal appears to admit that material climate-related risks are already subject to disclosure under existing rules…
If the pending rule were simply bureaucratic, pointless and expensive that would hardly be news in Washington. But the former SEC chiefs suggest it’s also lawless and destructive to enact climate rules masquerading as investor protection:
The Commission’s rulemaking powers simply do not authorize it to require disclosure of the vast quantities of immaterial information the Proposal contemplates.
In effect, though nominally framed as an investor protection initiative, the Proposal represents a roundabout way of regulating greenhouse gas emissions themselves, by handing a weapon to climate advocates. Environmental regulation is, however, not within the scope of the Commission’s statutory ambit… Equally concerning, the Commission has no special competence, let alone expertise, in climate science. As its mission suggests, its expertise is limited to financial markets. Moreover, the Commission is not the appropriate body to regulate climate-related matters, even if framed in terms of investor protection…
Nevertheless, with the Proposal the Commission embarks on a misadventure in climate regulation, by seeking to mandate disclosure of information climate activists have long sought in order to conduct pressure campaigns to achieve their desired political outcomes. Its frequent references to “investor demand”—a wholly inappropriate substitute for financial materiality—reveal that the Commission is listening to some investors, i.e. those with a particular climate agenda,and not others.
Now before readers get too depressed contemplating the future of American markets, the good news is that at least some public companies are trying to impede this latest climate crusade. The Journal’s Mark Maurer reports today:
Companies are tearing into the Securities and Exchange Commission’s proposal to impose mandatory disclosure requirements concerning climate risks and greenhouse-gas emissions, saying it poses heightened legal liability, hefty costs and reporting burdens…
The proposed rule, unveiled in March, would require publicly traded companies to report their emissions, including—in certain cases—those from customers and suppliers. Companies’ estimates of these emissions would require independent assurance, a type of review that’s usually performed by engineering, consulting or audit firms. Businesses also would have to review the impact of climate risks stemming from extreme weather events, such as floods, on their finances…
Gap Chief Financial Officer Katrina O’Connell said in a June 2 letter to the SEC that the regulator didn’t provide enough clarity about how it defines what is material to shareholders, which is the threshold for certain disclosures. That would result in her company and others providing investors with inconsistent information, Ms. O’Connell said.
Just because disclosures are unhelpful to investors doesn’t mean they won’t be useful to plaintiff attorneys. Mr. Maurer reports:
Lawyers that represent corporations and investors have said the SEC’s proposal could be a potent source of securities fraud litigation, which targets companies over alleged lies or even half-truths told to the investing public. The idea is that making a company talk more—on the record, in their mandatory disclosures like annual reports—means people are more likely to catch it in a mistake…
Dow, meanwhile, said the proposal would require the chemicals maker and other businesses to maintain two separate sets of records on greenhouse-gas emissions, resulting in higher costs and the need for more resources.
Higher costs and more resources devoted to unproductive activity. Sounds like the perfect slogan for the president’s re-election campaign.
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