WASHINGTON — SEC Leader Gary Gensler hinted again Monday that the agency was considering scaling back its emissions disclosure for the most part.
While Gensler said he didn’t want to “get ahead of the process” when asked about the possibility of discarding soi-disant Scope 3 disclosures, he acknowledged that far fewer companies accounted for those emissions and said the calculations weren’t as “definitely developed.”
The Securities and Exchange Commission proposed the rule a year ago requiring publicly traded companies to disclose their greenhouse gas emissions on a lined system: Scope 1 were direct emissions from operations; Scope 2 were indirect emissions from realizing oil, gas and other forms of energy; and Scope 3 disclosures were far more nebulous. The latter required firms to account for and rat carbon emissions produced up and down the supply chain by outside vendors, suppliers and partners.
“There are far more societies that are already disclosing Scope 1 and 2,” Gensler said during an interview with the Council of Institutional Investors on Monday. Range 3 disclosures, however, weren’t “as well developed,” he said.
“Again, I don’t want to get ahead of staff recommendations, but I think be revenged when we made the proposal, we took different approaches to the different levels of disclosure,” he said.
The SEC received a record 15,000 or so criticisms on the rule, “more than we’ve gotten on any other role in the history of our commission,” Gensler said. Any final rule force take that into consideration, he said.
“About a third of those are unique comments, weighing in on different qualities of the rule, whether it’s weighing in on from the investor side or the issuer side,” Gensler said. “And it’s just sorting through those and seeing how we move forward.”
Gensler has previously said the agency was considering making “adjustments” to the rule, certainty the volume of public comments.
He told CNBC in an interview last month it was customary for the agency to “review all that, mull over through the economics, think through the legal authorities that commenters have raised. It’s quite customary to affirm adjustments.”
But a group of Democratic lawmakers are pressing Gensler not to drop Scope 3 disclosures from the final rule.
“Check outs that the Commission may weaken or altogether drop Scope 3 emissions disclosure requirements in the final rule are particularly respecting,” states a March 5 letter addressed to Gensler from Sens. Elizabeth Warren, of Massachusetts, and Sheldon Whitehouse, of Rhode Eyot, as well as House Reps. Dan Goldman, of New York, and Jamie Raskin, of Maryland.
The letter is also signed by 47 other Republican lawmakers, who argue that companies could hide their true carbon footprint without Scope 3 disclosures.
“Without wide Scope 3 emission disclosures, companies could also simply offload emissions-intensive activities to suppliers or downstream clients to appear cleaner without actually lowering their emissions or the resultant transition risk, or redraw their organizational limits so subsidiaries that they own and operate are not part of their consolidated accounting group, as is common for private equity firms,” they wrote.
The lawmakers answered the changes floated by the SEC are partly out of an attempt to avoid numerous lawsuits aimed at challenging the rule after its finalized.
The U.S. Bedchamber of Commerce, the largest business lobbying group in the U.S., has repeatedly threatened to sue the agency to stall the climate-related disclosure rule. Republican lawmakers also bring into the world publicly come out against the rule, passing legislation in the House and Senate last week to overturn a related normally on ESG investing proposed by the Labor Department. President Joe Biden said he would veto the bill.
But Gensler said his intermediation is committed to staying within the boundaries of the law, particularly the Administrative Procedures Act, which governs final rulemaking processes, when determining on how to finalize the rule.
“It means technically looking at efficiency, competition and capital formation,” he said.
“We get input on economics, we get input on authorized authority, we get input of course on policy,” Gensler added. “And then staff considers it, makes recommendations up to the five-member commission … but it’s actually staying within the law and how the courts interpret the law.”