The U.S. House passed a bill backing the Securities and Exchange Commission’s (SEC) push to craft new rules requiring more comprehensive environmental, social, and governance disclosures (ESG).
The bill was approved in the House by the narrowest of margins possible on June 16, a single vote.
Under bill H.R. 1187, the Corporate Governance Improvement and Investor Protection Act, the SEC would issue rules within two years requiring every public company to disclose climate-specific metrics in financial statements, requiring metrics tied to greenhouse gas emissions, fossil-fuel-related assets and other risks posed by the changing climate.
Although the bill specifically targets publicly traded companies and stocks in the electric power, finance, mining, non-renewable energy, and transportation industries, it also contains an open-ended clause stating, “any other sector determined appropriate by the commission, in consultation with the appropriate principals.”
Additional Provisions
In addition to the disclosure requirements, the bill incorporates elements of the ESG Disclosure Simplification Act of 2021, granting SEC the authority to amend securities laws to require broader ESG metrics.
The bill also establishes a Sustainable Finance Advisory Committee to advise the SEC on what ESG metrics should be included in the Commission’s future rulemaking, and gives the SEC discretion to incorporate “any internationally recognized, independent, multi-stakeholder environmental, social, and governance disclosure standards.”
‘Impose … Progressive Political Views’
Two days before the bill passed the House, Republican members of the Senate Banking Committee sent a letter to SEC Chair Gary Gensler and Commissioner Allison Herren Lee urging the Commission not to implement new global warming disclosures.
“We do not believe that any further securities regulations to specifically address global warming are necessary or appropriate, and will only serve to further discourage firms from becoming publicly traded, thus denying significant investment opportunities to retail investors,” the letter said. “The push for more disclosure related to global warming has little to do with providing material information for investment purposes.
“Rather, activists with no fiduciary duty to the company or its shareholders are trying to impose their progressive political views on publicly traded companies, and the country at large, having failed to enact change via the elected government,” Republican Senate Banking Committee members wrote.
‘Regulator’s Field Day’
The House bill and the SEC’s pending climate disclosure proposal are attempts by activists to force businesses and investors to place preventing climate change ahead of their desires for making a profit and having a secure retirement, with the encouragement of investment firms run by activists or profiting from government-backed green energy programs, says Craig Rucker, president of the Committee For A Constructive Tomorrow, which co-publishes Environment & Climate News.
“Efforts by the SEC to require stringent ESG disclosures is not just an overreach by the government with respect to jurisdiction, but an outright attempt to strong-arm the business community into embracing far-Left causes,” Rucker said. “Expect activist groups to use this data, as well as lending institutions and politicians, to pressure industry into becoming even more woke.
“Among the things very troubling about ESG disclosures is they are now being used by huge investment firms, like Blackrock, to determine which companies get financial backing,” said Rucker. “Now the feds will likely also use it to determine which companies get government contracts and other perks; such collusion between bureaucrats and Wall Street should alarm everyone.”
The House bill gives the SEC too much discretionary power over corporations and portfolio funds, opening the door to massive abuse by regulators of an activist bent, Rucker says.
“Broadening the requirements of ESG reporting to ‘any other sector determined by the commission’ is basically giving license for bureaucrats to leave no sector of the American business community unscathed,” Rucker said. “It will be a regulator’s field day.”
The bill now heads to an evenly divided Senate, where the filibuster rule will likely require a 60-vote majority, meaning, at a minimum, it would need the support of ten GOP senators to become law.
Kevin Stone (kevin.s.stone@gmail.com) writes from Arlington, Texas.