Editor’s Note: Morning Money is a free version of POLITICO Pro Financial Services morning newsletter, which is delivered to our s each morning at 5:15 a.m. The POLITICO Pro platform combines the news you need with tools you can use to take action on the day’s biggest stories. Act on the news with POLITICO Pro. The Securities and Exchange Commission took a big step toward delivering on the Biden administration’s climate agenda Monday, proposing new rules that would require companies to disclose greenhouse gas emissions and hold them accountable for their climate promises. With the White House’s climate agenda bogged down in Congress, the proposed rule would deliver a durable policy win for the president, our colleagues Lorraine Woellert and Zack Colman report. Per Lorraine and Zack: “The rule would generate detailed information on how corporations, financial services firms and other businesses are being affected by climate change. It would force executives to explain how they’re coping with extreme weather, supply chain disruptions and other climate-related upheavals. It follows years of shareholder demand for more information and an admission by the SEC that existing requirements are inadequate.” Gensler goes lean — Regulators often start with a meaty (i.e. ambitious) policy proposal, with the expectation that they’ll need to trim some fat along the way in response to pushback from stakeholders. In this case, SEC Chair Gary Gensler took on the industry feedback up front and delivered a leaner version of the proposal than progressives had hoped and some industry analysts expected. The rule would require companies to disclose indirect emissions generated by their suppliers and customers, known as scope 3 emissions. After hearing from business groups, the SEC included safe harbors, exemptions and a longer phase-in for scope 3 reporting. “It is heartening that some of these considerations were taken into account,” Tom Quaadman, an executive vice president at the U.S. Chamber of Commerce, told our colleagues. “We’re at the very start of a process, and we’re going to have to see where the final rule ends up. It’s still a jump ball.” Eric Pan, CEO of the Investment Company Institute, said the group will carefully study the scope 3 approach but added, “[we] appreciate that the SEC recognizes the many challenges that currently exist with reporting scope 3 emissions.” It hasn’t quieted critics — Progressives are unhappy with the draft language on scope 3, which they say gives companies a big out. And opponents of the rule argue it goes way beyond the SEC’s authority. Sen. Ed Markey (D-Mass.) urged the agency to expand the proposal to quickly require scope 3 requirements, rather than phase them in. “We are not only asking companies to tell us what they do, but suggesting how they might do it,” Republican SEC commissioner Hester Peirce, who voted against the rule, said during a meeting on the proposal Monday. “Society is in big trouble if we are looking to SEC lawyers, accountants and economists to dictate how companies should address climate change.” But, but, but — Unveiling a more moderate version of the proposal now may help avoid big revisions later, which could delay the rulemaking process and open them up to legal risk, said Ty Gellasch, a fellow at the Global Financial Markets Center at Duke University School of Law. “They know they don’t have enough time to re-propose it,” Gellasch said. “So I think the idea was to propose what they expect to adopt, or very close to it, and that way they don’t have to worry about the litigation risk of having the final rule be significantly different from the proposal.” A big, big deal? It’s important to remember, as Lorraine and Zack point out, that this proposal is all about information. It doesn’t require companies to reduce their carbon footprint; the SEC is not an environmental regulator. Thousands of firms are already disclosing details about emissions standards and targets under voluntary standards set by the business community. It’s a watershed moment for the issue and will put points on the board for the Biden administration. To what extent – and in what direction – will it change investor behavior? That remains to be seen. IT’S TUESDAY — Tweet of the day is an inflation question from Marc Goldwein, of the Committee for a Responsible Federal Budget: “Was at a restaurant that charged for rolls today. How does [the Bureau of Labor Statistics] measure inflation when the price goes from nothing to something?” BLS wonks and inflation data nerds, we await your answer: kdavidson@politico.com, aweaver@politico.com. Or find us on Twitter: @katedavidson or @aubreeeweaver.
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