The U.S. House of Representatives passed a bill backing the Securities and Exchange Commission’s (SEC) push to craft new rules requiring more comprehensive environmental, social, and governance (ESG) disclosures.
H.R. 1187, the Corporate Governance Improvement and Investor Protection Act, would authorize the SEC to issue rules within two years requiring every public company to disclose in financial statements any climate-specific metrics tied to greenhouse gas emissions, fossil-fuel-related assets, and other presumed risks posed by the changing climate.
The bill targets publicly traded companies and stocks in the electric power, finance, mining, nonrenewable energy, and transportation industries, plus “any other sector determined appropriate by the commission, in consultation with the appropriate principals.”
Broad New Authority
In addition to the disclosure requirements, the bill incorporates elements of the ESG Disclosure Simplification Act of 2021, now under consideration in the Senate, which would grant the SEC the authority to amend securities laws to require more ESG information.
The bill would also establish 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.”
Senators Expressed Concerns
Two days before H.R. 1187 passed the House, Republican members of the Senate Banking Committee sent a letter to SEC Chair Gary Gensler and SEC Commissioner Allison Herren Lee urging the commission not to require 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 senators’ 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,” the Banking Committee members stated.
The House bill and the SEC’s pending climate disclosure proposal are blatant attempts to force businesses and investors to place climate change theories ahead of profit, 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 are not just overreach by the government with respect to jurisdiction but an outright attempt to strongarm 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,” Rucker said. “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.”
Universal ‘License for Bureaucrats’
The House bill gives the SEC too much discretionary power over corporations and portfolio funds, opening the door to massive abuse, 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. That means the legislation will fail if it does not receive the support of at least ten GOP senators.