California Lawmakers Encourage SEC to Adopt Climate Disclosure Rules

California Lawmakers Encourage SEC: In a letter to Gary Gensler, the chairman of the U.S. Securities and Exchange Commission, more than two dozen Democratic legislators from California urged him to follow the precedent California recently set by mandating companies to disclose detailed greenhouse gas emissions data.

A bill enacted into law by California Governor Gavin Newsom on October 7 will mandate that companies operating in the state and generating annual revenues exceeding $1 billion provide comprehensive disclosure of their greenhouse gas emissions.

California Lawmakers Encourage SEC to Adopt Climate Disclosure Rules

Large organizations are obligated by law to disclose their scope 1, 2, and 3 emissions. Scope 1 emissions consist of those produced by fuel sources owned by an organization, such as vehicles, boilers, and furnaces. Scope 2 emissions consist of greenhouse gases utilized in the production of electricity, steam, heat, or ventilation utilized by a business. Scope 3 emissions are produced in an indirect manner through the supply chain and are nearly invariably the most substantial and most challenging to monitor category of emissions for any organization.

The SEC put forth a proposal in March 2022 to enforce a collection of climate disclosure regulations. These regulations would mandate companies to provide disclosures regarding their greenhouse gas emissions as well as “information regarding climate-related risks that are reasonably probable to significantly affect their business, results of operations, or financial condition.”

Opponents of the forthcoming regulation’s inclusion of Scope 3 emissions, including Exxon Mobil, Walmart, and agricultural organizations including the National Cattlemen’s Beef Association, the National Cotton Council, and the Wisconsin Pork Association, have submitted numerous comments to the SEC. All of these organizations have requested a Scope 3 exclusion for the agricultural industry at a minimum.

California Extended Tax Deadline: Here is what you need to know to avoid taxes

“Without consistent and reliable Scope 3 data, investors will be limited in evaluating the management’s performance with respect to those risks and opportunities,” the letter says.

The letter states, “Inspirational investors will be unable to assess management’s performance in relation to those risks and opportunities in the absence of consistent and dependable Scope 3 data.”

In addition, California legislators assert that the cost for California businesses to provide the same information to federal regulators is negligible, given that the state has passed SB 253, which mandates that large businesses in the state report their Scope 3 emissions.

A spokesperson for the SEC told CNBC that Gensler would respond to Congress directly regarding his the agency’s intentions, and added that the SEC “benefits from robust engagement and will review all comments submitted during the open comment period.”

On September 27, Gensler testified before the Committee on Financial Services of the United States House of Representatives that the SEC typically updates its rulemaking within a timeframe of 12 to 24 months. However, he further stated that the SEC would not be hurried into a final adoption.