Statement by Commissioner Peirce on Final Rules Regarding Mandatory Climate Risk Disclosures
Thank you, Mr. Chair. The final rule is different from the proposal, but it still promises to spam investors with details about the Commission’s pet topic of the day—climate. As we have heard already, the recommendation before us eliminates the Scope 3 reporting requirements, reworks the financial statement disclosures, and removes some of the other […]
Hester M. Peirce is a Commissioner at the U.S. Securities and Exchange Commission. This post is based on her recent statement. The views expressed in this post are those of Commissioner Peirce, and do not necessarily reflect those of the Securities and Exchange Commission or its staff.
Thank you, Mr. Chair. The final rule is different from the proposal, but it still promises to spam investors with details about the Commission’s pet topic of the day—climate. As we have heard already, the recommendation before us eliminates the Scope 3 reporting requirements, reworks the financial statement disclosures, and removes some of the other overly granular disclosures. But these changes do not alter the rule’s fundamental flaw—its insistence that climate issues deserve special treatment and disproportionate space in Commission disclosures and managers’ and directors’ brain space. Because the Commission fails to justify that disparate treatment, I dissent.
The Commission does not point to a persuasive reason to reject the existing principles-based, materiality focused approach to climate risk. While the Commission insinuates that companies focus too little on climate risks, it offers scant concrete evidence of inappropriate reserve, and even highlights that 36% of annual Commission filings include climate information.[2] Our existing disclosure regime already requires companies to inform investors about material risks and trends—including those related to climate—by empowering companies to tell their unique story to investors. The Commission’s 2010 climate guidance explains how climate-related issues, particularly pertaining to a company’s financial condition, could be required in disclosures under the Commission’s existing regime.[3] Under current rules, companies may have to disclose, among other things, information relating to the “[i]mpact of legislation and regulation,” “international accords,” “[i]ndirect consequences of regulation and business trends,” and “[p]hysical impacts of climate change.”[4] And, although the responsibility for disclosing lies with the company, the Commission’s Division of Corporation Finance reviews company filings and sends comment letters to companies to ensure that they are fulfilling this responsibility. Companies that do not make accurate or complete disclosures could face enforcement actions or private lawsuits.
