October 26, 2023
Chair, Securities and Exchange Commission
Executive Vice President, Center for Capital Markets Competitiveness (CCMC), U.S. Chamber of Commerce, Executive Vice President, Center for Technology Engagement (C_TEC), U.S. Chamber of Commerce, Executive Vice President, Global Innovation Policy Center (GIPC), U.S. Chamber of Commerce, Senior Advisor to the President and CEO, U.S. Chamber of Commerce
To help business owners navigate developments in the climate disclosure sphere, Gary Gensler, Chair of the Securities and Exchange Commission (SEC), sat down with U.S. Chamber Executive Vice President Tom Quaadman to discuss the state of corporate climate disclosure in the U.S. and abroad. Their fireside chat breaks down the current state of regulations in Europe and California and how they might interact with the SEC’s own forthcoming rule on climate disclosure.
From the European Union’s Corporate Sustainability Reporting Directive (CSRD) enacted earlier in 2023 to California’s climate disclosure law set to go into effect in 2026, climate-based regulation is becoming increasingly commonplace. Though the SEC plays a role in governing corporate disclosure to investors, Gensler clarified that the institution’s job is not to regulate climate requirements.
“We’re not a climate regulator; we’re sort of a disclosure-based regulator,” he elaborated. “It’s about the investors; it’s about materiality as well [and] what a reasonable investor finds significant … when they’re making an investment decision.”
Gensler added that voluntary climate disclosure is already becoming more commonplace, with 81% of Russell 1000 companies already disclosing some level of information about climate risk as of 2021.
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Commenters Have Expressed Concerns Regarding the SEC Proposal’s Implementation
Gensler noted that there is little standardization across different reporting requirements. To streamline and standardize this process, the SEC proposed rule changes in March 2022 that would require registrants to detail climate-related risks and financial metrics in their financial statement footnotes.
According to Gensler, many comments in the SEC’s comment files expressed concerns regarding the implementation of this proposal. A primary area of concern was the logistic complexity and necessity of disclosing Scope 3 emissions, or those that are part of a business’s supply chain.
“Investors have told us … that understanding the emissions of a company’s supply chain … helps [them] understand transition risk, [or] what might be the future for that business,” Gensler explained on the reasoning behind the proposed disclosure.
He also added that standardizing the reporting process could benefit capital formation rather than hinder it, and the proposal would only impact public companies. (Read the U.S. Chamber’s position on the SEC’s proposed rule on climate disclosure.)
Gensler closed by expressing appreciation for those who took the time to share their feedback, which helps the SEC make informed decisions.
“We truly benefit every day from hearing from issues [and] the Chamber’s members … our client base is the American public, the issuers, and investors,” said Gensler. “We aren’t going to always agree, but [we may] at least disagree agreeably.”