Manchin, McCuskey raise concerns about SEC climate impact rule

CHARLESTON - From Capitol Hill to the State Capitol, elected leaders in West Virginia are raising alarm bells about a new federal rule focused on the climate impact of businesses instead of their financial impacts.

According to a press release Monday, U.S. Sen. Joe Manchin wrote a letter to Gary Gensler, chairman of the U.S. Securities and Exchange Commission, detailing the West Virginia Democrat's complaints with a new proposed SEC rule requiring companies to disclose climate-related impacts.

"I am deeply concerned that the proposed rule has the potential to run counter to the SEC's long-standing commitment to its mission by adding undue burdens on companies, while simultaneously sending a signal of opposition to the all-of-the-above energy policy that is critical to our country right now," Manchin wrote.

On March 21, the SEC announced it had proposed rule changes to require companies to include certain climate-related disclosures in registration statements and certain reports. Some of the disclosures would include certain greenhouse gas emission reports, climate risks on company operations.

"Today, investors representing literally tens of trillions of dollars support climate-related disclosures because they recognize that climate risks can pose significant financial risks to companies, and investors need reliable information about climate risks to make informed investment decisions." Gensler said in a statement last month. "Today's proposal would help issuers more efficiently and effectively disclose these risks and meet investor demand, as many issuers already seek to do."

The SEC is the regulatory agency that manages securities exchanges, such as the New York Stock Exchange. The agency regulates brokers, dealers, investment advisors and mutual funds, as well as prosecutes fraud and provides transparency for investors. Manchin said the SEC's proposed climate impact rule goes far beyond protecting investors and slips into political territory.

"I firmly believe that the SEC has a duty and responsibility to every American to uphold their mission and prevent an unraveling of our U.S. economy," Manchin wrote. "However, that duty and responsibility unfortunately becomes tainted when the Commission publishes rules that seemingly politicize a process aimed at assessing the financial health and compliance of a public company."

Manchin, the chairman of the Senate Energy and Natural Resources Committee, called the rule onerous and unneeded, citing examples of other companies that already provide much of this data voluntarily.

"...One could argue that the proposed rule aims to solve a problem that does not exist," Manchin wrote. "Further, to suggest that any and all public companies have the resources and capabilities to capture this data is shortsighted. Forcing this rule on companies has the potential to not only impose undue financial hardships, but also to erode public trust, especially if less-resourced companies are unable to accurately report this data."

Manchin is joined in his concerns by State Auditor J.B. McCuskey. On March 25, McCuskey announced he was working with state auditors in other states to oppose the rule. The State Auditor's Office regulates securities, investment advisors and brokers at the state level.

"We believe that the markets should be fair and free. The SEC plays an enormously important role in that," McCuskey said. "However, if this body is seen as being tainted by the stink of politics, its usefulness evaporates because investors will see this once noble institution in the same way they see all the federal government, bloated, ineffective, political and unneeded."

Both Manchin and McCuskey believe that the SEC climate impact rule will hurt fossil fuel companies, such as coal and natural gas producers, the most.

"Not only will these companies face heightened reporting requirements on account of their operations, but they will also be subjected to additional scrutiny for the Scope 3 emission disclosures of other companies that utilize their services and products," Manchin wrote. "Furthermore, accelerated and large accelerated filers would be required to take the additional step of obtaining certification from a third-party to attest to the accuracy of the disclosures."

"The idea that investors should know if statements made by publicly traded companies are accurate is legitimate," McCuskey said. "However, this administration is so hopelessly intent on destroying the extractive industries, it seems impossible for them to accomplish this goal in a fair and neutral way. Unfortunately, it appears the SEC has now moved from asking what companies have done, to telling them how they should do it."

In his letter to the SEC Chairman Gensler, Manchin asked the agency to go back and review the rule and make changes before moving forward.

"I urge both you and your fellow Commissioners to reassess the structure and need for these additional disclosures and to consider alternative reporting requirements, particularly for those that are already required to disclose emissions and climate-risk data to other agencies," Manchin wrote. "Ultimately, I am interested in the implementation of rules that are rational and ensure that the system is fair. Reassessing the responsibilities of our nation's energy companies within these disclosures is a critical component to reaching that fairness."