SEC’s decision on climate disclosures will have unintended consequences
On Monday, the Securities and Exchange Commission voted along party lines to require companies to disclose their climate-related risks and greenhouse gas emissions. The SEC’s actions not only exceed its authority and expertise but will lead to unintended consequences.
It will place another bureaucratic burden on companies that are already moving towards greener practices in good faith. It would require companies to report details on practices even the Biden administration favors—like setting an internal carbon price or guessing about impacts of weather events that have not yet occurred. This would then expose companies to existing penalties and liabilities from the SEC for potential inaccurate reporting. This disincentive could lead companies to spinoff assets or choose to simply refrain from engaging in such environmental impact mitigation efforts altogether to avoid such liability.
What’s worse, this decision could encourage more companies to seclude to private markets. Without having to listen to even shareholders that want climate strategies, there will be less incentive to address emissions. Less oversight and accountability seem contrary to the administration’s intended goals. Companies delisting from the stock market is not good for our economy or the administration’s efforts to combat climate change.
Despite serious flaws, the SEC has identified a problem that needs to be solved. Addressing climate change will require rewarding companies for good behavior. Companies need reliable data on the emission profiles of their operations and products to best attract investment, understand areas of need for lowering emission intensity and illustrate best practices.
However, the unelected officials at the SEC are not best positioned to address this challenge. Congress should pass legislation to establish bipartisan consensus on how these calculations and monitoring should occur.
Thoughtful, bipartisan legislation can create systems that look at our domestic industries and identify the emissions of foreign-produced products. We know that the U.S. produces energy and manufactures products in a cleaner way than Russia and China. We can act on that advantage, benefit U.S. producers, and expand domestic production while reducing global emissions.
Unfortunately, this unilateral action by the SEC is another step by the Biden administration that will undermine domestic productivity and benefit our adversaries who care little about protecting the environment.
We need to act together. Congress has seen the fruits of bipartisan work in recent months, like the Bipartisan Infrastructure legislation passed last November. While the SEC’s partisan and misguided rule is a step in the wrong direction, there’s a real need.
It’s time for the Biden administration to sit down with bipartisan members and get serious about real solutions.
Cassidy is the senior senator from Louisiana.
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