The Securities and Exchange Commission is currently facing legal challenges to its new climate rule, which requires publicly traded companies to report greenhouse gas emissions and other climate-related risks. Many in the industry are concerned about the legal risks and ambiguity surrounding what constitutes a “material” climate risk under the rule.
At a recent House Financial Services Committee hearing, Liberty Energy CEO Chris Wright testified that the disclosure requirements increase liability risks for companies without effectively addressing climate change. Companies are worried about the accuracy of reporting emissions, which could make them vulnerable to challenges from environmental activists.
Some argue that the SEC has overstepped its authority by regulating environmental matters, which should be handled by the Environmental Protection Agency instead. Commissioner Mark Uyeda warned that the rule could be abused by special interests to push their climate-related goals onto public companies.
Critics also raise First Amendment concerns, claiming that mandatory climate disclosures infringe on a company’s right to free speech, especially if the information is controversial or speculative. They argue that irrelevant disclosures will make it harder for investors to make informed decisions and could harm the competitiveness of American companies.
The rule is expected to have a significant impact on the oil and gas industry, potentially discouraging investors from supporting American companies and shifting demand to foreign or government-owned enterprises with less stringent environmental standards. This could lead to an increase in emissions globally.
While disclosure of material climate risks makes sense, many believe that the SEC’s climate rule goes too far and should be repealed in the best interest of the energy sector and investors. Todd Johnston, Vice President of Policy at ConservAmerica, emphasizes the importance of balancing environmental concerns with economic interests.
