March 21, 2022

Casten, Castor Respond to SEC Move to Protect Investors From Climate-Related Risks

 

FOR IMMEDIATE RELEASE

Contact: Emilia.Rowland@mail.house.gov

Casten, Castor Respond to SEC Move to Protect Investors From Climate-Related Risks

WASHINGTON (March 21, 2022) – Congressman Sean Casten (D-IL) and Chair Kathy Castor of the House Select Committee on the Climate Crisis released the following statement on Monday, after the Securities and Exchange Commission (SEC) proposed amendments to its rules in order to enhance and standardize registrants' climate-related disclosures for investors as Casten's Climate Risk Disclosure Act would codify legislatively.

Currently, public companies are not mandated to disclose their exposure to climate-related risks. As a result, investors lack access to basic information about the potential impact of the climate crisis on American companies, creating enormous environmental and financial risks.

Passing common-sense, market-based solutions to safeguard our financial system against climate change has been one of Congressman Casten's top priorities since his first day in Congress. Last June, the House passed Casten's Climate Risk Disclosure Act to require public companies to disclose information about their exposure to climate-related risks. Senator Elizabeth Warren (D-MA) has championed this issue alongside Casten, introducing the Senate companion bill, S.1217.

Casten said, "Markets are an indispensable tool that we must leverage in order to make the transition to clean energy fast enough to prevent climate catastrophe. But for markets to work efficiently, investors need transparency. That's why I was proud to introduce the Climate Risk Disclosure Act with Senator Warren, prompting the SEC to initiate a rule-making process to require publicly traded companies to disclose climate-related risks.

"For any climate disclosure rule to have teeth, it must fully mandate disclosure of "Scope 3" emissions embedded in a company's supply chain—including emissions caused when customers use its products," Casten continued. "I applaud the SEC for releasing this critical proposal and urge them to thoroughly evaluate feedback to ensure the strongest possible final rule that will empower investors to make smarter decisions and harness the power of the free market to help us win the race against the climate crisis before it's too late."

"Climate risks and harms are growing across our communities with threats to our economy. Investors, pension fund managers and the public need better information about the physical and transition-related risks that climate change poses to hard-earned investments," said Chair Castor. "That's why our Climate Crisis Action Plan recommended updating climate disclosure rules to ensure transparency about companies' greenhouse gas emissions, and to give investors a better picture of the risks that climate change and extreme weather could pose to the companies in which they invest. Today's decision by the SEC to update its climate disclosure rules is the right step forward to design rules that protect investors from harm and ensure the efficient flow of capital. I applaud the SEC Chairman and Commissioners for responding to the urgent call for action from investors and business leaders alike, and for working to provide better access to consistent, reliable, and comparable disclosures of climate-related risks on investments in publicly-traded companies."

Background:

  • A 2020 report by the Commodity Futures Trading Commission found that climate change could pose systemic risks to the U.S. financial system and concluded that the 2010 SEC guidance has not resulted in high-quality disclosure of climate change risks across U.S. publicly listed firms, and that it should be updated in light of global advancements over the preceding 10 years.
  • In March 2021, the SEC Division of Examinations announced its 2021 examination priorities, which included an increased focus on climate-related risks and the consistency and adequacy of the disclosures. In the same month, Acting SEC Chair Allison Herren Lee requested public input from investors, registrants, and other market participants on ways climate disclosure rules could be enhanced, including by providing more consistent information for investors and clarity for registrants.
  • In 2010, the SEC issued "Guidance Regarding Disclosure Related to Climate Change" to assist publicly listed companies in evaluating when climate change risks require disclosure

After the SEC requested public comment on Climate Disclosures, initiating the rulemaking process last year, Congressman Casten and Senator Warren submitted a comment letter to Chairman Gensler, making the case that the current voluntary framework is not sufficient for investors to fully understand the risk they're exposed to and urging the SEC to mandate climate risk disclosure for public companies as their Climate Risk Disclosure Act would codify legislatively.

The Climate Risk Disclosure Act directs the SEC, in consultation with climate experts at other federal agencies, to issue rules within two years that require every public company to disclose:

  • Its direct and indirect greenhouse gas emissions;
  • The total amount of fossil-fuel related assets that it owns or manages;
  • How its valuation would be affected if climate change continues at its current pace or if policymakers successfully restrict greenhouse gas emissions to meet the 1.5 degrees Celsius goal; and
  • Its risk management strategies related to the physical risks and transition risks posed by the climate crisis.

The Union of Concerned Scientists recently released a letter of support for the Climate Risk Disclosure Act signed by 82 organizations across a broad ideological spectrum.

Casten has also emerged as the Congressional leader pushing federal regulators to build resilience within our financial system and broader economy to protect against systemic climate risk.

In July of 2021, the House Financial Services Committee held a hearing on what actions must be taken to address the grave and imminent threat climate change poses to the U.S. financial system—focusing on the dire need for federal regulators to build resilience within our banking system. Of the three bills noticed for the hearing, two were introduced by U.S. Congressman Sean Casten (D-IL):

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