US public pension funds and business groups clash on SEC climate risk disclosure shift

{"text":[[{"start":9.96,"text":"Major public investors, including pension funds Calpers and Calstrs, have clashed with big business lobby groups over the Securities and Exchange Commission’s proposal to rescind a rule requiring companies to disclose certain climate-related information."}],[{"start":24.785,"text":"The US securities regulator in May proposed rescinding the Biden-era climate risk disclosure rule that was never enacted after it ran into the threat of lawsuits by various Republican-led states and trade groups."}],[{"start":36.92,"text":"Under the Trump administration, the SEC said the rule was a “dramatic over-reach” of the commission’s authority, but some big asset managers and pension funds have argued that climate-related information is financially material even as big business groups supported rescinding the rules."}],[{"start":52.36,"text":"Vanguard, the world’s second-largest asset manager and a target of Trump-era legal threats, tried to strike a balance in its submission in response to the SEC 60-day comment period."}],[{"start":63.42,"text":"The asset manager, with $12tn of assets under management, said it agreed that policymakers should avoid imposing disclosures that are “costly, confusing and overburdensome”."}],[{"start":74.2,"text":"But it also noted there was value in “standardised and comparable disclosure of material risks, including material climate-related risks”."}],[{"start":82.72,"text":"“When a company has identified material climate-related risks, disclosure about these risks should enable more accurate valuations and efficient price discovery,” Vanguard said."}],[{"start":92.36,"text":"Norway’s $2tn sovereign wealth fund was also careful in its response. It opposed the “outright rescission” of the rule but said it believed there were alternatives “that would address the Commission’s concerns about scope and cost, while preserving a baseline of financially material disclosure”."}],[{"start":107.72,"text":"Several public pension funds opposed the SEC’s move, including the California Public Employees’ Retirement System (Calpers), the California State Teachers’ Retirement System (Calstrs), as well as the New York state comptroller Thomas DiNapoli, who oversees the $294.4bn New York State Common Retirement Fund."}],[{"start":126.88,"text":"Calpers said in a letter the rescission of the rule would result in uneven reporting, forcing investors to gather data through proprietary questionnaires and third-party estimates, which would be fragmented, less reliable and more costly."}],[{"start":139,"text":"In contrast, business groups, including the Business Roundtable — a coalition of more than 200 chief executives of big US companies — backed axing the rule."}],[{"start":148.64,"text":"The American Petroleum Institute, whose oil and gas company members would be significantly affected by the rules because of the focus on greenhouse gas emissions, climate-related risks and energy transition planning, said a “full and prompt rescission” would “produce real benefits”."}],[{"start":163.64,"text":"“It will eliminate substantial and unnecessary compliance burdens . . .  It will protect investors from being inundated with information that is not material.”"}],[{"start":172.38,"text":"Notably, individual asset managers were split on the issue along geographic lines, demonstrating a transatlantic divide."}],[{"start":180.6,"text":"Federated Hermes’ London-based EOS arm, which oversees $2.4tn of assets under stewardship, said it continued to believe that investors would benefit from “consistent, comparable and reliable disclosure of material climate-related risks and opportunities”, while agreeing with the SEC that there were opportunities to eliminate redundancies across disclosure requirements."}],[{"start":201.72,"text":"But, in a separate submission, the overall business of Federated Hermes, based in Pittsburgh, said it supported the proposal to rescind the rule “and return to a disclosure framework centred on materiality, issuer-specific analysis, and the commission’s longstanding principles-based approach”."}],[{"start":218.08,"text":"“I’m not surprised that there are investors opposing the recession,” said Allison Herren Lee, former commissioner at the SEC who helped oversee the development of the climate risk disclosure rule. “When the SEC proposed the climate risk disclosure rule, it was after lots of feedback from investors and issuers in support of a rule.”"}],[{"start":237.135,"text":"Although US companies may not be subject to a federal sustainability reporting law, they could still be subject to disclosure rules in other jurisdictions."}],[{"start":245.12,"text":"A variety of states, including New Jersey, Colorado and Illinois, have proposed state-level reporting rules. New York has advanced a bill to mandate that companies disclose their emissions, while California will require companies doing business in the state that meet a revenue threshold exceeding $1bn to release operating emission disclosures by November."}],[{"start":265.76,"text":"Brooke Lierman, Maryland comptroller, who also oversees the state’s public retirement assets and wrote a letter to the SEC opposing its shift, said the patchwork of emerging state-level reporting requirements will increase the cost of doing business."}],[{"start":278.96,"text":"“It behoves all of us to have one standard set of disclosures required by the SEC,” she said."}],[{"start":285.84,"text":"The SEC did not comment."}],[{"start":288.48,"text":"Additional reporting by Attracta Mooney in London"}],[{"start":null,"text":"

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