The 16 Governors say the proposed rule veers far outside the SEC’s authority as a federal agency.

On March 21, 2022, the U.S. Securities and Exchange Commission (SEC) proposed a rule that would compel publicly traded companies to make detailed disclosures about climate-change risks and greenhouse gas emissions.

The proposed rule changes would require a registrant to disclose information about:

  1. The registrant’s governance of climate-related risks and relevant risk management processes.
  2. How any climate-related risks identified by the registrant have had or are likely to have a material impact on its business and consolidated financial statements, which may manifest over the short-, medium-, or long-term.
  3. How any identified climate-related risks have affected or are likely to affect the registrant’s strategy, business model, and outlook.
  4. The impact of climate-related events (severe weather events and other natural conditions) and transition activities on the line items of a registrant’s consolidated financial statements, as well as on the financial estimates and assumptions used in the financial statements.

On Tuesday, Mississippi Governor Tate Reeves (R) announced that he joined 15 Governors in a letter to President Biden and SEC Chairman Gary Gensler to urge the withdrawal of the proposed rule and allow the market to continue serving as the appropriate mechanism for judging climate risk, as it does for other types of market risks.

“As gas prices hit record highs, rather than unleash American energy production, Pres Biden is choosing to weaponize the SEC (and I’m not talking football) to push his Green New Deal climate agenda, directing it to overstep its authority and create rules that punish businesses,” Governor Reeves said. “I’ve joined 15 fellow governors to call on President Biden to stop punishing American energy.”

“As governors, we are deeply concerned your proposed rule veers far outside the SEC’s authority as a federal agency,” the letter said, adding, “The proposed rule will harm businesses and investors in our states by increasing compliance costs and by larding disclosure statements with uncertain and immaterial information that the federal government—let alone the SEC— is not equipped to judge,” the letter continued.

In the letter to President Biden, the Governors included a portion of Commissioner Hester M. Peirce’s dissenting statement: 

“The proposal turns the disclosure regime on its head. Current SEC disclosure mandates are intended to provide investors with an accurate picture of the company’s present and prospective performance through managers’ own eyes. The proposal, by contrast, tells corporate managers how regulators, doing the bidding of an array of non-investor stakeholders, expect them to run their companies. It identifies a set of risks and opportunities—some perhaps real, others clearly theoretical—that managers should be considering and even suggests specific ways to mitigate those risks. It forces investors to view companies through the eyes of a vocal set of stakeholders, for whom a company’s climate reputation is of equal or greater importance than a company’s financial performance.”

In addition to Reeves, Governors who have signed the letter include Spencer Cox (R-UT), Kay Ivey (AL), Mike Dunleavy (AK), Doug Ducey (AZ), Asa Hutchinson (AR), Brad Little (ID), Kim Reynolds (IA), Mike Parson (MO), Greg Gianforte (MT), Pete Ricketts (NE), Doug Burgum (ND), Kevin Stitt (OK), Kristi Noem (SD), Greg Abbott (TX), and Mark Gordon (WY).