Economy and Society, June 28, 2022: SEC climate disclosure rule comments submitted

Economy and Society is Ballotpedia’s weekly review of the developments in corporate activism; corporate political engagement; and the Environmental, Social, and Corporate Governance (ESG) trends and events that characterize the growing intersection between business and politics.

ESG Developments This Week

In Washington, D.C.

SEC climate disclosure rule comments submitted; BlackRock, others, pushing back on key areas

The Securities and Exchange Commission’s (SEC) deadline for submitting comments on its proposed climate change disclosure rule passed on June 17. During the extended comment period, the Commission received several thousand comments, many of which were supportive but a significant number of which were not. Among those who filed public comments opposing the rule were the following:

  • BlackRock, Inc. 

Although BlackRock is seen as the key asset management driver in the sustainability and ESG spaces, the company and its CEO have long been opposed to federal government intervention in such matters, believing that the markets are better equipped to handle these disclosures. In 2021 Fink appeared at a Brookings Institution event, at which he argued that the SEC should leave the disclosure issues for publicly traded companies to the professionals and that the government should, instead, focus on forcing similar disclosures from privately held companies.

Last week, BlackRock reemphasized those ideas:

“BlackRock Inc. is pushing back on key parts of the US Securities and Exchange Commission’s bid to get publicly traded companies to track and disclose their greenhouse gas emissions.

The agency’s approach threatens to increase compliance costs for firms and may unintentionally make it harder for investors to discern information that’s significant to a company’s bottom line, BlackRock said in a letter to SEC. The firm, among the leading advocates for sustainable investing, said it supports the overarching goal of having public companies disclose climate-related information….

While Republican lawmakers and businesses groups have submitted letters to the SEC rejecting parts or all of the proposal, the pushback from BlackRock is notable because its the world’s biggest asset manager.

Parts of the proposal “will decrease the effectiveness of the commission’s overarching goal of providing reliable, comparable, and consistent climate-related information to investors,” a group of BlackRock executives led by Paul Bodnar, global head of sustainable investing, wrote in the letter.

If the SEC goes beyond international efforts, the changes could “obscure what information is material, have limited value to investors, heighten compliance costs and reduce the ability to compare across companies and regions,” BlackRock said in the June 17 letter that it disclosed on its website Tuesday….

BlackRock urged the SEC to revamp its proposal to provide more flexibility to companies in how they report the information and to better align with global efforts. Without the changes, the asset manager said the plan could harm capital markets and even discourage private firms from going public.”


Over the past year, Nasdaq has aimed to become a leader in ESG, going so far as to issue a requirement last year mandating board diversity for all companies trading on its exchange. Nevertheless, it too opposes the SEC’s new rules:

“Nasdaq Inc. is pushing back against the US Securities and Exchange Commission’s plans to make publicly traded companies reveal detailed information about their greenhouse gas pollution.

The stock-exchange operator urged the SEC to shelve its plans to require businesses to outline risks that a warming planet poses to operations in registration statements, annual reports or other documents. The mandatory disclosures that the agency proposed in March would place undue burdens on companies and ultimately cost investors, Nasdaq said on Wednesday….

“We are concerned that the proposal would impose additional complexity, costs and burdens on issuers, suppliers, and ultimately, investors, and thereby undermine the commission’s core goals,” Nasdaq said in the letter reviewed by Bloomberg News. The SEC, instead, should consider letting firms take a more voluntary approach….

Nasdaq specifically asked the regulator not to require larger companies to disclose so-called Scope 3 emissions, which are generated by other firms in their supply chain or customers using their products. Business groups say that information is particularly hard to quantify. 

In addition, the exchange operator also wants the regulator to offer companies legal safe harbors and exemptions for special purpose acquisition companies.”

  • The Business Roundtable

Not quite three years ago, the Business Roundtable put itself at the center of the ESG and stakeholder capitalism debate by issuing a document whereby its signers proposed to, in its view, redefine the purpose of a corporation. The idea behind the statement was to put stakeholders, including the environment, on an even footing with shareholders and thus alter both the function and the public perception of large corporations.

Nevertheless, on comment deadline day, the Roundtable urged the SEC to go back to the proverbial drawing board:

“Business Roundtable today filed comments in response to the U.S. Securities and Exchange Commission (SEC) “Enhancement and Standardization of Climate-Related Disclosures for Investors” proposed rule.

“Business Roundtable members, who are industry leaders in climate change action and disclosure, have serious concerns with the SEC’s proposal,” said Business Roundtable CEO Joshua Bolten. “Key provisions of the current proposal are unworkable and would not produce information that is comparable, reliable or meaningful for investors. We urge the SEC to revise and repropose the rule.”

In the submission, Business Roundtable said:

“While Business Roundtable supports efforts to enhance climate-related disclosure, we believe a number of key provisions in the Proposal, as drafted, are unworkable and would impose requirements that could not be satisfied in the manner and timeframe proposed, and may not result in decision-useful information for investors. Among other concerns, the Proposal would require registrants to produce overwhelming amounts of information that would not be comparable, reliable or meaningful, much less material, for investors. The Proposal would also subject registrants to significant liability for disclosures that inherently involve a high degree of uncertainty. For these reasons, as well as those laid out below, we urge the SEC to publish a revised proposal addressing these concerns for further comment.”…

Business Roundtable identified the following key concerns:

–          The Proposal fails to acknowledge or address the increased liability risk the new disclosure requirements would generate;

–          The proposed Regulation S-X financial reporting requirements are unworkable;

–          The proposed Scope 3 GHG emissions disclosure requirements are overly burdensome and unlikely to result in comparable, investor-useful information;

–          The Proposal would require an overwhelming amount of disclosure that is not tied to materiality, would not provide useful information for investors, and could result in disclosure of sensitive information and/or could chill development of best practices;

–          The Proposal presents significant implementation challenges; and

–          The Proposal’s cost-benefit analysis is fundamentally flawed and significantly understates the ultimate compliance costs of the rules.”

  • General Motors and Goldman Sachs  

According to Bloomberg Law, the CEOs of GM and Goldman went above and beyond writing comment letters and actually met with SEC Chairman Gary Gensler to express their concerns about the new disclosure regime in person:

“Goldman Sachs CEO David Solomon and General Motors CEO Mary Barra are among the top executives who’ve met with SEC Chair Gary Gensler over his agency’s plan to make companies disclose indirect greenhouse gas emissions as part of new climate reporting rules.

Gensler has met with dozens of senior corporate leaders at least once, and some more often, since the Securities and Exchange Commission issued a sweeping proposal in March intended to help investors evaluate the risks public companies face from climate change, according to agency records….

Barra met with Gensler both on her own and as part of a larger group, according to SEC records….

Goldman Sachs executives met with Gensler or members of his staff at least three times about the climate disclosure proposal.”

  • The Michigan Farm Bureau 

As has been noted in these pages and elsewhere, many farmers have reported concern about how the SEC’s disclosure proposal would affect them, as they are likely to be included among the Scope 3 emissions requirement for three dozen or more S&P 500 companies. The Michigan Farm Bureau has specifically asked the SEC to reconsider its proposal based on this concern:

“Michigan Farm Bureau is weighing in on a controversial proposal by the Securities and Exchange Commission (SEC) that would have a devastating impact on agriculture and open farmers to intrusive data-mining practices.

The 510-page Enhancement and Standardization of Climate-Related Disclosures for Investors would require public companies to report on emissions — including Scope 3 greenhouse gas emissions — which are the result of activities from assets not owned or controlled by a publicly traded company but contribute to its value chain, which is how this rule impacts farmers.

While farmers wouldn’t be required to report directly to the SEC, they provide almost every raw product that goes into the food supply chain.

In comments submitted to the SEC, MFB Conservation and Regulatory Relations Specialist Tess Van Gorder noted that farmers in Michigan have a history of participating in voluntary programs, from Farm Bill Conservation programs to the Michigan Agriculture Environmental Assurance Program….

In the comments, MFB encouraged the SEC to consider changes to the proposal, including:

–          Removing the “value-chain” concept from the Proposed Rules.

–          Removing or substantially revising the Scope 3 emissions disclosure requirement to include a carveout for the agricultural industry.

–          Removing the requirement that registrants provide disclosures pertaining to their climate-related targets and goals.

–          Providing guidance with respect to the Consolidated Appropriations Act’s (2022) (the “CAA”) prohibition on mandatory GHG emissions reporting for manure management systems.

–          Revising the Proposed Rules so that disclosures of GHG emissions operate in unison with existing federal emissions reporting programs.

–          Ensuring the Final Rules do not include location data disclosures for GHG emissions, which may inadvertently disclose the private information of farmers.

“Without changes and clarifications, the Proposed Rules would be wildly burdensome and expensive if not altogether impossible for many small and mid-sized farmers to comply with, as they require reporting of climate data at the local level,” MFB’s letter states.”

Notable quotes

George Will weighs in on ESG

On June 22, conservative newspaper columnist George Will used his Washington Post column to address ESG and stakeholder capitalism:

“Semantic infiltration is the tactic by which political objectives are smuggled into discourse that is ostensibly, but not actually, politically neutral. People who adopt a political faction’s vocabulary also adopt — perhaps inadvertently, but inevitably — the faction’s agenda. So, everyone who values economic dynamism, and the freedom that enables this, should recoil from the toxic noun “stakeholder.”

The Oxford Reference definition is “all those with interests in an organization,” including “shareholders, employees, suppliers, customers, or members of the wider community (who could be affected by environmental consequences of an organization’s activities).” Which means: everyone. “All” in the “wider community” who claim an “interest.” Anyone can make such claims; no one can refute them.

A former governor of the Bank of England (Mark Carney), the head of the world’s largest investment firm (Larry Fink of BlackRock) and the CEO of the largest U.S. bank (Jamie Dimonof JPMorgan Chase) have joined forces to make capitalism “sustainable” through “ESG” (environmental, social and governance) investing. Although fashionable, this is of dubious legality. (See below: fiduciary duty.) The Economist’s “Schumpeter” columnist notes that sanctimony accompanies such “financial do-goodery.” Of course: ESG appeals to people for whom mere business — the creation of wealth and opportunity — lacks the cachet of politics….

Stakeholder capitalism violates fiduciary laws that require those entrusted with investors’ money to employ it “solely in the interest of” and “for the exclusive purpose of providing benefits to” the investors. (Emphasis added.)…

In a dynamic society, resources are efficiently disposed by corporate managements whose primary duty, which other corporate activities do not compromise, is to maximize shareholder value by profitably supplying the demand for goods and services. Furthermore, in a congenial society, boundaries are respected: Most people say about most things, “This is none of my business.”

Self-proclaimed stakeholders, parasitic off others’ labor and accumulation, assert that everything is their business. Actually, although everyone has a right to advocate progressivism, no one has a right to insist on a stake in deploying others’ property for the stakeholders’ political ends.”