The Securities and Exchange Commission (SEC) recently adopted rules allegedly designed to enhance and standardize climate-related disclosures by public companies and in public offerings. The SEC justified the rule based on supposed demand from investors for more information regarding climate-related risks.
This is a dubious proposition. If investors demand more information from public companies to help them make investment decisions, then public companies have an incentive to provide that information without the need for onerous new SEC requirements. Companies increasingly provide such information on a voluntary basis.
Moreover, as SEC Commissioner Hester M. Peirce observed: “Our existing disclosure regime already requires companies to inform investors about material risks and trends—including those related to climate.”
SEC Commissioner Mark T. Uyeda called the new rule “a roadmap for abuse,” adding: “Today’s rule is the culmination of efforts by various interests to hijack and use the federal securities laws for their climate-related goals.”
Indeed, the SEC describes its purpose in clear language: “The SEC’s mission is to protect investors; maintain fair, orderly, and efficient markets; and facilitate capital formation.”
The new climate and rules have nothing to do with those goals. They are likely to make things worse for investors, not better, by increasing regulatory and compliance costs for public companies.
The SEC’s action serves as a reminder that the proper place to address climate-related issues is in Congress, or even better, in the free market where companies must respond to consumer demand. Investors should not be forced to bear the burden of these expansive and expensive new SEC climate rules.