OPINION:
The Securities and Exchange Commission was founded as an independent government agency in the aftermath of the 1929 Wall Street crash, which precipitated the onset of the Great Depression. It was founded with the mission to “protect investors [and] maintain fair, orderly, and efficient markets.” The SEC, however, has gone beyond its job description over the last year as it proposed a rule to push an environmental agenda that seeks to punish companies for certain climate-related activities.
The agency’s proposed climate disclosure rule would require publicly traded companies to report on their direct greenhouse gas emissions — emissions from their electricity for heat and cooling — and indirect emissions from suppliers. This proposal has been hotly debated since it was rolled out early last year. Now, the agency has issued a public notice, saying the final version of the rule is scheduled to be released in April.
First, the actions by the SEC, in this case, are wholly removed from its mission of “protecting investors.” By rushing this rule through the rulemaking process, despite a number of publicly debated issues with the wisdom and legality of such a measure, the commission’s proposal will put investors in a bind. Businesses will be put in a costly situation, scrambling to come up with the information demanded by the SEC, leaving investors to make quick, tough decisions about their finances. As a commission that stands to protect investors, this rule does quite the opposite.
Investors have already taken enough of a hit in 2022, with estimates by JP Morgan showing that U.S. households lost a combined value of $5 trillion due to falling equities. If the SEC wanted to truly protect our nation’s investors — per its stated mission — it would find ways to get the government out of the way of American businesses. To create that value for investors across the nation, businesses need the opportunity to become more efficient rather than have more hurdles to jump.
This regulation would be immensely costly for businesses of varying sizes nationwide. Research indicates businesses will spend cumulatively up to $10.2 billion annually to comply with this regulation if the final version released in April is similar to public proposals. This would require analyzing, evaluating and reporting direct and indirect climate impacts. This is in addition to the money that might be spent coming into further compliance with whatever environmental changes might be made as a result.
This regulation not only counteracts the SEC’s stated mission but also gives the agency power it was never intended to have. Nearly a century ago, when the agency was formed, it would have been unthinkable to use the SEC as a climate regulator. It might have been unthinkable just a few short years ago. Now, the SEC seems to think it can become reality.
Recently, Federal Reserve Chairman Jerome Powell noted that climate policy is “more properly overseen by elected officials.” He said he would decline to make his agency a “climate policymaker,” especially where there is no congressionally delegated authority. Where Congress makes laws of the land, agencies such as the SEC should be focused on enforcing those laws rather than trying to create and implement their own — especially when it falls so far outside of the scope of their responsibilities.
Overlooked in the entirety of this discussion is that there are already market mechanisms in place to enact the sort of change that SEC regulators are discussing. If investors want companies in which they invest to publish climate impact documents, they are well within their rights to demand that change, with the freedom to invest in companies that do so. They can let their money speak for the idea that there is a demand for such disclosure. If investors really want something like this, they already have the tools at their disposal. For the SEC to come in to do it by fiat is a solution in search of a problem.
Over the last few years, the U.S. economy has taken a series of hits, facing record-high inflation and damaging many Americans’ investments and savings. It has also seen the federal government accrue more power than it has held in a long time, if not in the history of the nation. This SEC rulemaking combines two of the worst trends of the recent past into one regulation. That the agency is trying to rush it to the finish line exemplifies bad governance and indicates the agency that knows it rests on shaky ground.
The SEC should reconsider their hasty, self-imposed deadline and — for that matter — this entire regulatory effort altogether.
• Dan Savickas is director of policy at the Taxpayers Protection Alliance.
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