Gensler says Scope 3 emissions flap is delaying final climate risk rule

Written on Sep 21, 2023

SEC Chair Gary Gensler said the agency has not yet released a final rule requiring disclosure on climate risk partly because of public concern that companies would need to report Scope 3 carbon emissions across their supply chains. 

The SEC has received more than 16,000 public comment letters about the climate risk disclosure rule that it proposed in March 2022, with many asserting that Scope 3 reporting will prove onerous for small businesses, Gensler said. “We got a lot of comments around what’s called Scope 3 disclosures, and that’s what we’re trying to move forward on,” he said in testimony to the Senate Banking Committee. 

Gensler declined to estimate when the SEC will adopt a final regulation, while noting that rule revisions can take from 12 to 24 months. “We try not to do things against the clock,” he said, adding “it’s really when the staff is ready and the [five-member agency] commission is ready.” 

Republicans on the House Financial Services Committee, during a series of hearings in July, stepped up their opposition to the climate risk disclosure proposal and to efforts by shareholders, Democrats and other stakeholders to promote environmental, social and governance best practices. 

Republican lawmakers in the Senate and House have said that the SEC and ESG activists undermine capitalism, harm Main Street investors and thwart company efforts to increase shareholder value. 

The SEC also plans to release rules on corporate board diversity and “human capital management disclosure.” 

Referring to the proposed requirement that companies report carbon emissions and climate risk, Gensler said “many U.S. issuers are already disclosing climate risk information and investors are making investment decisions” based on the information. The SEC, for the sake of investors, aims to ensure the reports are consistent and comparable, he said.