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February 6, 2023

MSCI Joins Coalition Asking SEC Find Better Solution For Climate Disclosures

Last week, the Metals Service Center Institute (MSCI) joined the National Association of Manufacturers (NAM) and more than 50 other manufacturing organizations to send a letter to members of the U.S. Senate Banking Committee and the U.S. House Financial Services Committee asking that federal lawmakers insist the U.S. Securities and Exchange Commission (SEC) develop a more workable solution for its climate disclosure rule, which it is expected to finalize sometime this spring.

As Connecting the Dots reported last year, the SEC proposal would require public companies to:

  • Report greenhouse gas (GHG) emissions generated directly by a company’s operations or indirectly by a company’s energy usage. If “material” to investors, companies also would have to report emissions resulting from upstream and downstream activities in their value chain. (This requirement could impact private companies that would have to coordinate with and report to their publicly traded business partners.)
  • Analyze climate impacts on their existing financial statement line items, including revenues, cash flow, and capital expenses.
  • Assess and disclose “physical risks” (like fires and floods) and “transition risks” (like climate regulations or new green business models) related to climate change and to outline how they are working to mitigate them.

The rule also would require public companies that have made certain climate pledges to report information on how these goals are set, tracked, and accomplished. As MSCI argued last year, these mandates would impose significant compliance burdens on publicly traded manufacturers. They also would increase burdens for privately held businesses within public companies’ supply chains.

The letter, available here, argued manufacturers “cannot afford such an impractical and overbroad regulation” and urged Congress to work with the SEC on a more tailored proposal. The good news is that the letter came as The Wall Street Journal reported the SEC is considering changes that would soften the rule.

In related news: Republicans on the U.S. House Financial Services Committee announced last week that they had established an ESG working group to:

  • Rein in the SEC’s regulatory overreach;
  • Reinforce the materiality standard as a pillar of our disclosure regime; and
  • Hold to account market participants who misuse the proxy process or their influence to impose ideological preferences in ways that circumvent democratic lawmaking.

Oversight and Investigations Subcommittee Chair Bill Huizenga (R-Mich.) will lead the group, which will include 10 other House Republican lawmakers. Read more here.

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