(Reuters) – U.S. listed companies have backed down on a landmark proposal from the Securities and Exchange Commission to get corporate America to disclose a series of greenhouse gas emissions figures.
Groups including the US Chamber of Commerce, the Banking Policy Institute, the National Association of Manufacturers and the American Petroleum Institute have asked Wall Street regulators for more discretion in the details they provide to investors, according to public correspondence sent to the agency.
The extent of the recovery highlights the pressure the SEC is facing to repel at least part of its climate agenda, although the extent to which companies can succeed in winning concessions remains to be seen. The supervisory authority has also seen support for the rules.
The letters, dated this month, came in response to a draft rule presented by the SEC in March that would require public companies to state their own direct and indirect greenhouse gas emissions, known as “Scope 1” and “Scope 2 emissions. ”
The measure would also require companies to disclose emissions generated by suppliers and customers, so-called “Scope 3” emissions, if they are significant or part of any emission targets set by the company.
This aspect of the rule has aroused some of the strongest opposition, including from a top investor group.
The proposed rules “are enormous and unsurpassed in their scope, complexity, rigidity and prescriptive distinctiveness,” wrote the Chamber of Commerce, the most powerful American trade group. Among other things, it suggested that reporting in Scope 3 should be voluntary.
Comments on the proposal would be submitted on Friday and will inform the SEC’s final regulations, which some analysts expect by the end of the year. Many companies are now making ESG – environmental, social and governance – revealing under voluntary standards, and in the light of developments in the European Union, where officials aim to reduce net emissions from planetary warming by 55% by 2030 from 1990 levels.
US President Joe Biden has said he wants to halve US greenhouse gas emissions by 2030 and reach net zero emissions by 2050.
SEC President Gary Gensler has said the agency responded to demands for consistent information from investors, who have invested about $ 7.5 billion in US sustainable funds so far this year.
The SEC’s rule may face legal challenges because its benefits do not outweigh the significant reporting costs, or because it exceeds the SEC’s powers, according to a commentary from George Mason University’s law professor JW Verret.
To be on the safe side, the agency has also received a lot of support, including from Democratic U.S. senators and from California Public Employees ‘Retirement System, the United States’ largest pension fund. It praised aspects of the proposal, including its call for companies to provide details on potential emission reduction targets.
Some of the sharpest criticism came from US Republican politicians, reflecting other critics of ESG investments who say that efforts to address environmental and other social issues are best left to elected leaders, not companies.
West Virginia Attorney General Patrick Morrisey, along with 23 other government officials, for example, called the SEC’s proposed rule “an inappropriate misconduct in environmental regulation” that is legally unjustifiable and should be suspended.
Republican senators also backed the SEC’s proposal, arguing that the measure would entail huge costs for the US economy.
Looking for tweaks
The main groups of companies did not go so far as to demand that the rule be abolished, but instead proposed changes to limit its scope.
NAM proposed that the proposed reporting requirements for Scope 3 be repealed and that compliance with Scope 1 and Scope 2 be facilitated.
Such changes “would significantly ease the burden of compliance and reduce investor confusion while preserving the spirit of the proposed rule,” it wrote.
Although the API said it could not support the current proposal, it supports “rapid and accurate reporting of greenhouse gas emissions.”
Investors have widely supported the press for new climate information as a way to clarify the current mix of corporate statements that can vary widely in detail and approach.
The Investment Company Institute, which represents the top US asset managers, said it supported key elements of the SEC’s proposal including for Scope 1 and 2 disclosure, as measurements are now good enough to show investors “consistent and comparable information.”
But data gaps and disagreement over methodology mean that the SEC should withdraw its Scope 3 proposal, wrote ICI.
“The SEC’s proposal should strike a better balance between ensuring that investors get the information they need, without flooding them with unimportant information,” ICI CEO Eric Pan told Reuters.