Highlights progress made and new challenges since 2022 Task Force meeting on climate-risk disclosures

Washington (June 12, 2024) - The Senate Climate Change Task Force, chaired by Senator Edward J. Markey (D-Mass.), chair of the Environment and Public Works Subcommittee on Clean Air, Climate and Nuclear Safety, today held a discussion with climate finance experts on the importance of the recent finalized Securities and Exchange Commission (SEC) climate-risk disclosure rule, which would require public companies to disclose financial risks from climate change that will protect markets, workers, and communities. The Task Force discussion highlighted the developments made in the past two years on climate risk disclosures and how the future of the rule will affect stakeholders and interact with further reaching regulations in California and the European Union.

During the discussion, Senator Markey spoke with experts who reiteratedthat the final climate-riskdisclosure rule is squarely within the Commission’s mandate and will provide baseline protections for investors, including workers. Senator Markey also highlighted that the final rule could have gone further by requiring disclosure of emissions throughout the supply chain—also known as Scope 3 emissions—and removing the materiality qualifier, which allows companies to make the call on whether they consider climate risks to be necessary to report to investors.

“By issuing a rule to require publicly traded companies to disclose climate-related financial risks, the SEC is offering an extremely modest and much-needed baseline protection for investors, including workers. Nurses, teachers, or firefighters with a pension plan are all investors and have a right to know the potential impacts that a company’s operations might have on their savings,” said Senator Markey. “While this rule isn’t everything we wanted, it still represents a commonsense step forward that will ensure investors big and small – from pensioners and retirees to hedge fund managers -- are getting the information they need to make sound financial decisions in a rapidly changing world.”

“Climate change poses systemic risks to our economy and financial system, as hearings in the Senate Budget Committee have documented.  Accurate emissions reporting is the best way to measure a company’s energy transition risks and, like any other indicator of a company’s long-term health, it is material information for investors to consider.  Accurate information about a company’s ability to survive systemic economic shocks from climate is also vital,” said Whitehouse, Chairman of the Senate Budget Committee. “While it’s not as robust a rule as it could be, the SEC’s final rule rests on a strong factual and legal basis for rulemaking and will better protect investors, the economy, and the planet from climate-related damages.”

“In order to make informed decisions about their future, investors need and have a right to review accurate information about companies' climate-related financial risks and their long-term environmental impacts. That’s why I’ve long called for increased transparency around companies’ environmental commitments to combat greenwashing, including pushing the SEC to strengthen its enforcement of current climate rules and guidance,” said Senator Welch. “This rule offered by the SEC is a necessary step toward stronger disclosure of companies’ climate commitments and related financial risks, and will help protect investors and workers.”

“Climate change is an ever-growing threat to our environment and economy, which is why we have been pushing for robust disclosure rules to create transparency on climate risk. While the SEC’s recent action could have gone further, this is an important step to help American investors, workers, and retirees make better informed decisions about their savings,” said Senator Van Hollen.

“The long-running and unprecedented legal campaign against the SEC’s climate disclosure rulemaking continues with the Eighth Circuit case seeking to invalidate the final rule. Despite the range of objections--legal authority, major questions, materiality, cost-benefit, and more--in my view the final rule is consistent with nine decades of SEC rulemaking practice and stands on firm legal ground,” said George Georgiev, Business Law Professor at Emory University.

“What investors need above all is information that is clear, consistent, reliable, and decision-useful to understand and assess a company's business, risks, and prospects and to make decisions about how and where to allocate capital. Should the SEC climate disclosure rule go into effect, investors in the U.S. capital markets will have a powerful new set of data and tools to make informed decisions in navigating the energy transition, consistent with their investment goals and objectives, allocation targets, risk tolerance, liquidity requirements, and fiduciary responsibilities,” said Cambria Allen-Ratzlaff, Chief Responsible Investment Ecosystems Officer at the Principles for Responsible Investment. “It is encouraging to see that despite external pressures investors are not changing their fundamental investment practices since these are already grounded in fiduciary duty and their use of ESG data or engagement on financially material ESG issues reflects efforts to fulfil that duty. Looking ahead, the PRI looks forward to working with investors and policy makers in protecting our investor signatories as well as all investors in the U.S. capital markets."

“The SEC’s climate risk disclosure rule represents the culmination of more than 20 years of investor advocacy for high-quality, decision-useful disclosures of companies’ climate-related risks. The final rule falls squarely within the SEC’s investor protection mandate; it directly responds to the overwhelming demand in the market for better information on these risks, and it will move public companies' climate reporting closer to the level of rigor that exists for financial reporting,” said Jake Rascoff, Director of Climate Financial Regulation at the Ceres Accelerator for Sustainable Capital Markets.

“Worker pension funds are not a piggy bank for the fossil fuel industry. The people who manage worker pension funds have a fiduciary duty to protect the retirement security of our members.  How companies respond to the threat of climate is going to be a key driver of pension fund returns for decades to come,” said Damon Silvers, Senior Advisor at American Federation of Teachers. “Consequently, fiduciaries need the kind of information on greenhouse gas emissions that the SEC is seeking to require companies to disclose to carry out that duty. Congress should be supporting the Commission in what it has done and working with the Commission to move forward to a genuine comprehensive system of climate-related public company disclosure.”

“The SEC climate disclosure rule is critically important to protect investors and encourage more efficient markets,” said Hana Vizcarra, Senior Attorney at Earthjustice. “However, should it survive the unwarranted attacks on SEC's authority, the Commission will have a lot more work to do to ensure disclosures provide the information investors need to make informed decisions about companies’ financial risks.”

Witness testimony can be found here from:

  • George Georgiev, Emory University
  • Cambria Allen- Ratzlaff, Principles for Responsible Investment
  • Jake Rascoff, Ceres
  • Damon Silvers, American Federation of Teachers
  • Hana Vizcarra, Earthjustice

In March 2024, Senator Markey released a statement on the SEC final rule that supported public disclosure of climate-related risks. In August 2022, Senator Markey hosted a Senate Climate Change Task Force meeting on the SEC proposed rule on climate-related risk disclosure. In June 2022, Senator Markey led a letter to SEC Chair Gary Gensler urging the Commission to strengthen its proposed rule on the disclosure of climate-related risks to investors, including Scope 3 emissions.

In March 2023, Senator Markey reintroduced the Fossil Free Finance Act, legislation that would direct the Federal Reserve to require major banks and other Systemically Important Financial Institutions to stop financing projects and activities linked to increased greenhouse gas emissions and submit a plan on how they will meet these requirements.