Big companies squirm as Biden tightens climate regulations
BlackRock CEO Larry Fink, who has been hailed by some as a business leader in the fight against climate change, supports a call for companies to comply with a voluntary global standard instead and warns against potential gaps in government intervention. And Republican lawmakers appear to be allies of companies resisting looming transparency rules.
“This is about solving a societal problem that is not simply the mission of the SEC,” said Representative Patrick McHenry, the top Republican on the House Financial Services Committee. “I would like the Securities and Exchange Commission to stick with what it does and we elected officials make these large-scale societal decisions.”
At the heart of the clash is a broader argument over how much control the government should have over business, a debate that will intensify as President Joe Biden’s administration prepares to impose stricter regulations on the government. economy after four years of decline by former President Donald. Asset.
Reluctance to accept government The growing role in climate policy is being echoed by business groups in Washington, DC, who are calling for flexible disclosure requirements. The Democrats’ campaign is set to spark a lobbying blitz as companies attempt to shape regulations that could require them to publicly quantify their carbon footprint, potential financial losses from climate-related risks, and their plans to make their operations more sustainable over the years. the environmental plan.
A growing number of companies are responding to the pressure by voluntarily releasing more climate data, although industry representatives say companies are divided on the issue.
“Some people care, but they don’t want to be told what to do,” said Stephen Brown, a veteran energy industry consultant who headed the federal affairs office for oil refiner Tesoro for 12 years. . “There are others who would like to be told how to do it.”
The United States Chamber of Commerce and the American Petroleum Institute, two of the largest trade associations, warn of a one-size-fits-all approach to rules, which could expose companies to legal problems if they do not accurately report information . API said it supports greater transparency, but the rules “must be applicable to different industries, promote access to capital for all sectors and allow company reports to demonstrate multiple pathways to management. of climate risks and opportunities “.
The Chamber argues that regulation should allow companies and their investors to determine the most relevant information to release, rather than imposing “rigid” standards. The House is among groups that in recent years have sued the SEC to block other corporate transparency rules. Climate disclosure advocates see litigation as a major risk for the agency.
“There are people who will be reluctant to impose disclosure requirements on public companies generally,” said former SEC President Mary Schapiro, who is now a key player in the development of international standards. climate reporting and supports mandatory disclosure. “There are people who will believe that this is not really about material information – this material means big and now and that the climate in many ways for some sectors may not be evident in the very short term.”
Republican officials are signaling they will fight the effort, giving the companies a powerful set of friends.
Republican SEC Commissioner Hester Peirce told POLITICO she was skeptical that climate-related requirements could meet the standard of “hard” information for investors, meaning they would be large enough to affect a company’s stock price.
“Imposing an expensive and prescriptive reporting regime would not give investors any meaningful new information, but would discourage companies from going public, reduce access to capital and slow economic growth, which would mean fewer jobs and opportunities for retail investors, ”said Senator Pat. Toomey of Pennsylvania, who will be the first Republican on the Senate Banking Committee.
BlackRock’s Fink argues that many publicly traded companies – those used to sharing information widely with investors – are on the right track to managing their climate risk amid increasing market pressure. He says the government should focus on private companies getting into more carbon-intensive ventures, but not disclosing as many details of their operations. Businesses that start disclosing information should get temporary legal protections to protect them if they misreport data, says Fink.
“We are going to witness a vast change in the public company arena around the world,” he said at a Brookings Institution event Tuesday. “They will go ahead. We won’t need any real government change or regulatory change.
But advocates say forcing large companies to follow a standard method of revealing their contributions to climate change is a critical step in reorienting the global economy on a path of reducing greenhouse gas emissions. A July Government Accountability Office Report found inconsistencies in the way companies communicate information on environmental and social issues of increasing interest to investors.
“There is, without a doubt, a significant and systemic risk to the financial system created by climate change,” said Representative Sean Casten (D-Ill.), Who drafted legislation with Senator Elizabeth Warren (D- Mass.) That would require the SEC to develop climate disclosure rules. “Yet if you are an investor and want to understand how much risk you are exposed to, you have no unambiguous measure that it is your exposure that is being done consistently.”
The United States is entering the debate after other countries, including the United Kingdom, decide to make climate risk disclosure mandatory for companies. The effort was aided by groups such as the Climate-Related Financial Disclosures Task Force, a G20-led organization chaired by Michael Bloomberg that has developed a framework for companies wishing to voluntarily disclose information. His work and that of the Sustainability Accounting Standards Board could form the basis of what the SEC is making mandatory for large companies. BlackRock’s Fink is among the leaders supporting both disclosure groups. It calls for a single international standard to avoid different requirements across the world.
The official who should lead the way for Democrats is Gary Gensler, Biden’s candidate for the SEC chairman. Gensler’s selection is encouraging for climate disclosure advocates, as he clashed with the banks when he was the primary regulator writing financial trading rules after the Wall Street collapse in 2008.
The SEC is hiring staff ahead of the climate push, including bringing back former head of the agency Satyam Khanna, who was an adviser to Principles for Responsible Investment, one of the groups calling for greater disclosure of climatic risks. Didem Nisanci, the new Treasury Department chief of staff, was also on the working group on climate-related financial disclosures.
Gensler “is likely to be convinced by the huge demand from the investing public for this type of information,” said Schapiro, who served with him as a regulator and is now a member of the Bloomberg-led Climate Disclosure Task Force. “The stock markets are highly globalized. Capital knows no borders or borders. The United States must participate with the rest of the world in solving these problems. This is something Gary will be very sensitive to.”
While some companies will resist government intervention, others see benefits for regulators to speed up standard reporting measures. But industry representatives say the methods used to measure and report climate impacts are still in development and it can be risky to codify them into federal rules.