On March 21, the Securities and Exchange Commission proposed a rule entitled “Promoting and Standardizing Climate-Related Disclosures for Investors” (pdf). The roughly 500-page rule requires SEC registrars — mostly public companies, investment advisors and brokers — to report some climate-related information including greenhouse gas (GHG) emissions.
Greenhouse gas emissions are categorized into three bands. Scope 1 is the recorder’s direct greenhouse gas emissions. Scope 2 is the indirect greenhouse gas emissions from purchased electricity and other forms of energy. Scope 3 is the indirect emissions from upstream and downstream activities in the registrant’s value chain.
Will Heald, executive director of Consumer Research, America’s oldest consumer protection organization, said in an interview with NTD’s “Fresh Look America” on July 12.
Suppose you bought a lawn mower with an internal combustion engine. The lawn mower company will need to know how often to mow the lawn. They have to go out and ask people about it and look for it. And so you can see how this begins to lay the groundwork for recording actual individuals’ activities,” Heald said.
According to the EPA’s Greenhouse Gas Inventory Guidelines, Scope 3 contains 15 categories such as “goods and services purchased,” “use of products sold,” “upstream and downstream transportation and distribution,” “employee mobility,” and more. .
“I think it’s a rather scary development, especially coming out of the SEC, which shouldn’t be involved in any of this, to lay the groundwork for something like that, and to have companies try to track that,” Held said.
For example, a car company might add a vehicle tracker to see monthly mileage, Heald said.
“It is not surprising to think that in order to keep them safe from the attorneys for the securities plaintiffs, they would engage in nearly levels of monitoring over the way the products are used,” Held said. “So they can say with some level of certainty that their estimates of CO2 Scope 3 output are accurate.”
Held said consumer research opposes the rule because it will harm individual investors and consumers.
“It’s bad for actual retail investors, people who are consuming investment products, funds, and brokerage services, looking for a return in stocks,” Held said.
“This is a huge cost. It is being added to annual reporting requirements for publicly traded companies,” Held said, noting that the expense would reduce returns for these companies, especially smaller ones.
Held said many companies looking to go public may be intimidated by the cost and go to a venture capitalist or hedge fund for financing. This is another disadvantage for individual investors because they will miss out on opportunities.
So we think retail investors have been hurt. But perhaps most importantly, this will lead to a significant increase in costs for consumers when they buy products and services in the market,” Held said. Because it will overburden these companies with a regulatory burden. It will also try to punish them for the supposed carbon dioxide emissions of the products they sell.”
“It’s an incredible increase in the regulatory burden that the SEC puts on public companies. If you add every regulation that the SEC has put in place regarding public company disclosure, that’s greater than the regulatory burden of all those other regulations. That’s it. The biggest thing they’ve ever done.”
The rule will also force suppliers of public companies to provide all information on carbon dioxide emissions, even if they are not publicly listed.
“It’s the SEC imposing effects on companies that are not publicly traded, which are supposed to be outside the SEC’s reach. So this is a massive increase in the SEC’s impact on the markets, the impact on investors, the access to our daily lives, Heald said.
ESG scores ‘similar’ to China’s social credit system
ESG stands for Environment, Social and Governance. Ideas have become critical criteria for assessing the long-term environmental, social and governance risks of an organization. Held said the proposed rule is an ESG-style policy and that ESG scores are “similar” to China’s social credit scores.
China’s social credit system is famous for its rapid progression from a banking and financial credit rating tool to a comprehensive government monitoring system.
Organizations and companies have developed different ESG rating systems to rank companies that have received ESG scores. But some experts have warned that personal ESG results will soon follow.
In December, FICO analyst Doug Craddock predicted that in 2022 “there will be an increased focus on developing new data assets such as individual carbon profiles.” FICO is a consumer credit rating agency.
“In the long term, we expect ESG and climate risk assessments to become an integral component of credit risk and affordability assessments,” Craddock added.
“I think it’s very likely that over the next couple of years, you’ll see financial institutions start using a personal social credit score of some sort to make decisions about things like you get loans, the interest rate, or whether it’s a personal social credit score,” said Justin Haskins, director of the Heartland Institute. You are eligible for insurance coverage.
In March, Standard & Poors, one of the world’s largest credit rating firms, announced that ESG’s scope would be expanded beyond corporate ratings to include US states.
“The term has no real definition,” Held said. “You can categorize companies pretty much any way you want.”
Heald said the radical left pushed al Qaeda.
This is exclusively the field of the progressive left, and it is really its most radical wing. Heald said. “If you look at the ESG’s metrics and goals, they are very much in line with what the progressive wing of the Democratic Party wants.”
The Securities and Exchange Commission received a significant amount of feedback during the public comment period that ended last month. The Securities and Exchange Commission (SEC) may take months to review comments before announcing its final decision.
Environmental groups, some government agencies, Democratic senators and House representatives, and some Democratic governors strongly support this rule. Senator Elizabeth Warren (D-Mass.) asked the Securities and Exchange Commission to adopt it “as proposed” in a jointly signed letter to SEC Chairman Gary Gensler on June 17.
Meanwhile, dozens of Republican senators, more than 100 members of the House of Representatives, and dozens of GOP governors expressed “great concern” about the proposed rule, and demanded that the agency repeal the rule immediately.
“This blanket rule, which is close to 500 pages, is unnecessary and inappropriate, beyond the mission and expertise of the SEC, and will harm consumers, workers and the entire American economy at a time of skyrocketing energy prices, and hijacking the democratic process in determining American climate policy.” 12 Republican senators led by Senator Pat Tomey (R-Pen) said in a June 15 letter to Gensler (pdf).
West Virginia Attorney General Patrick Morrissey, who won West Virginia v. EPA in the Supreme Court on June 30, sent an additional comment (pdf) along with 23 attorneys general on July 13, saying that the Supreme Court confirmed in the event that “Congress — It is not a federal administrative agency – it has the authority to decide on major issues at present.”
If the Commission insists on taking the same inappropriate path, we will be ready to act again. “We urge you to save years of discord over everyone by abandoning the proposed rule,” the attorney general said. The 24 prosecutors sent in their initial comment on June 15 (pdf).
The SEC commissioner also disagrees with the rule.
Hester Pierce, Trump’s appointee and the only Republican commissioner currently serving on the Securities and Exchange Commission, voted against the rule in March and issued a statement. The three Democratic commissioners voted for it.
Let’s be honest about what this proposal is really trying to do. Although considered a disclosure rule, the intent of this proposal – as with other climate disclosure efforts – is to direct capital to preferred companies and advance preferred political and social goals, Pierce said in her statement.
The Securities and Exchange Commission did not respond to a request for comment.
Kevin Stocklin contributed to this report.