On March 18, the House Financial Services Subcommittee on Oversight and Investigation held a field hearing entitled “Victims of Regulatory Overreach: How the Securities and Exchange Commission’s (SEC) Climate Disclosure Rule Will Harm Americans.” Witnesses in the hearing were:
- Ms. Whitney Hermandorfer, Director of Strategic Litigation Unit, Office of Tennessee Attorney General
- Ms. Renea Jones, Co-Owner, Jones & Church Farms, Inc.
- Professor Alex Scott, Associate Professor of Supply Chain Management, University of Tennessee, Knoxville.
Below are key takeaways from the hearing prepared by Delta Strategy Group.
Key Takeaways
Subcommittee Chairman Bill Huizenga (R-MI)
- The SEC has been unresponsive to Congressional input and requests for information in its rulemaking process. The climate disclosure rule blatantly undermines the Commission’s existing materiality standards. The SEC’s rule will redefine the materiality standard to prescribe climate-related disclosures for all public companies even when most reasonable investors would not find such information important to their investment and voting decisions. This rule is part of the aggressive regulatory agenda the SEC has been pursuing under the direction of Chair Gensler, and the cumulative impact of the rule on our markets, together with the onslaught of other rushed rulemakings, has yet to be analyzed by the SEC.
Subcommittee Vice Chairman John Rose (R-TN)
- This rule would cripple the agriculture industry and small businesses. This rule should be removed in its entirety. This rule departs from the previous understanding to report materiality, and it will be disadvantageous for American businesses.
Representative Andy Ogles (R-TN)
- The SEC’s climate disclosure Rule demands irrelevant disclosures, and companies should not be asked to comment on social and political issues, like climate change. The SEC’s rule is overreaching and unprecedented. Congress should nullify this rule.
Representative Andy Barr (R-KY)
- The climate disclosure rule is incredibly costly to companies and will ultimately detract from a company’s ability to deliver on returns to shareholders. This rule will result in overreporting, and there will likely be immaterial information provided.
Ms. Whitney Hermandorfer, Director of Strategic Litigation Unit, Office of Tennessee Attorney General
- The SEC lacks statutory power to promulgate these climate disclosure obligations. The EPA, not the SEC, maintains express power to require GHG disclosures in certain instances. Permitting agencies like the SEC rather than elected lawmakers to advance regulations that would seriously upend our federal structure.
Ms. Renea Jones, Co-Owner, Jones & Church Farms, Inc.
- To comply with Scope 3 reporting requirements, Jones & Church Farms would need to hire a legal consultant and a chemist, which would be very costly. From a record-keeping standpoint, my company would have to hire extra staff to provide data the SEC is asking for. Profit margins for farm operations are already tight due to inflated input costs, and hiring extra help to navigate these requirements would make margins even tighter, if not nonexistent. California has implemented similar requirements for companies doing business within their state, which has consequences for agriculture across the country due to interstate commerce of agricultural products into California.
Professor Alex Scott, Associate Professor of Supply Chain Management, University of Tennessee, Knoxville
- Climate reporting will impose significant costs on businesses to collect, compile, and verify climate data. Companies will need to implement measuring and monitoring systems that, in many cases, do not currently exist. It is not clear the exact value that the rule’s required data will provide to the SEC. This rule will increase incentives for companies to outsource operations and privatize.