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September 27, 2023

Rep. Schiff, Sen. Warren, Dozens of Lawmakers Urge SEC to Release Strong Climate Risk Disclosure Rule

Washington, D.C. – Today, Representative Adam Schiff (D-Calif.) joined U.S. Senator Elizabeth Warren (D-Mass.), a member of the Senate Banking, Housing, and Urban Affairs Committee, U.S. Representatives Rashida Tlaib (D-Mich.), and Jamie Raskin (D-Md.), in sending a letter to Securities and Exchange Commission (SEC) Chair Gary Gensler, urging the SEC to quickly release a final, strong climate disclosure rule.  The SEC’s regulatory agenda suggests it will finalize the rule in October 2023.

“We are writing to once again urge you to expeditiously release a final, strong climate disclosure rule that results in detailed disclosure of firms’ transition risk and opportunities, including Scope 1, 2, and 3 greenhouse gas (GHG) emissions, details around energy transition plans, and capital expenditures related to the transition… Finalizing a rule without these components could create a regulatory greenlight for public companies to disclose misleading GHG and transition plan information that systematically understates their transition risks,” wrote the lawmakers.

The lawmakers note that many legal experts have affirmed the SEC’s authority to promulgate a climate risk disclosure rule, and that there is broad support for their suggested provisions. Of institutional investors with more than $50 trillion assets under management collectively, 99% support Scopes 1 and 2 disclosure, 97% support Scope 3 disclosure in the same form as the Commission proposed, and 95% support disclosure of climate-related targets and goals. 

The lawmakers also reiterated the importance of including Scope 3 emissions in the final climate risk disclosure rule, noting that these are central to credible climate-related risk reporting for certain sectors and companies such as publicly-traded private equity firms, which seem particularly prone to presenting misleading climate-related claims to investors.

“Troublingly, recent reports have found significant inadequacies in financial firms’ climate-related disclosures, particularly around financed GHG emissions and emissions reduction commitments, bolstering the case for finalizing the rule as proposed and requiring immediate attention by SEC,” continued the lawmakers. “Scope 3 financed emissions are…on average…more than 700 times larger than the reporting entity’s direct emissions according to one study—but many such firms are currently presenting misleading information to investors by failing to report climate risks associated with debt and equity investments.”

Given these concerns, the lawmakers are calling on the SEC to include Scope 1, 2, and 3 greenhouse gas emissions, details around net-zero transition plans, and capital expenditures made towards the transition in its final climate risk disclosure rule to fulfill its mandate to protect investors.

The full letter can be found here and below: