On climate, SEC can dictate but market will decide

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If the market wants clarity and consistency, the substance of the SEC’s plan to increase climate-related reporting will happen even if regulatory fiat fails, writes johnsfoley:

The seal of the U.S. Securities and Exchange Commission is seen at their headquarters in Washington, D.C., U.S. REUTERS/Andrew KellyThe company and law firm names shown above are generated automatically based on the text of the article. We are improving this feature as we continue to test and develop in beta. We welcome feedback, which you can provide using the feedback tab on the right of the page.

Gensler is hardly sticking his neck out compared to overseers in Europe. The so-called Task Force on Climate-Related Financial Disclosures, a green reporting framework from which the SEC has taken its cue in a number of ways, becomes mandatory in the United Kingdom in April for large companies. The European Union has also been further ahead on the issue than the United States.The problem for Gensler is that some of the edgier parts of his proposal may fall flat at home.

History suggests, though, that even when a regulatory push fails, it can still happen if the market wills it. Take the so-called proxy access rule in 2010, in which the SEC told companies to let long-term investors with more than 3% of the shares more easily propose their own board directors. The rule was overthrown by a court that deemed its formulation “arbitrary and capricious.” Yet investors pushed, and companies mostly ended up adopting the practice anyway.

 

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