Will You Be Paying to Report Greenhouse Gas Emissions?

by Kent Lassman, President & CEO, Competitive Enterprise Institute

Let’s be honest, how many of your daily consumer choices are guided by a company’s climate-related disclosure activities? Most of us will likely answer little to none. Under a new proposal a group of unelected financial regulators would force all publicly traded companies to tediously report on activities related to greenhouse gas emissions, and other political objectives. Businesses would need to not only report on their own operations and the energy they consume, but in some cases even that of their supply chains and customers.

As Competitive Enterprise Institute Research Fellow Richard Morrison points out in a new piece for Real Clear Policy, the Securities and Exchange Commission’s latest power grab will impact private as well as publicly traded companies. The expansion in regulation is controversial within the corporate world because it will increase compliance costs and expose firms to new legal risks—and shareholders will shoulder these costs.

“The SEC claims that focusing on climate-related risk is about protecting investors, but that is clearly a secondary concern. The real goal is to create a framework by which corporations can be pressured, threatened, and cajoled into adopting operations consistent with the political demands of climate change activists. New disclosure requirements will be expensive and complex and generate greater legal risk for public companies.”

For years, Morrison and other experts at CEI have warned about the negative conse-

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quences of the growing trend toward environmental, social, and governance (ESG) investing mandates. “Governmental promotion of ESG is a policy setting the stage for future economic downturns,” says CEI Vice President for Policy and Senior Fellow Wayne Crews. “Rather than ESG making companies more profitable, profitable companies spend more money on ESG and divert shareholder money to enhance public reputation.”

The new SEC proposal puts narrow but powerful political interests ahead of you. As an investor, what matters is your ability to put money to work growing the companies that have earned your confidence. It is more important to consider your goals, like retirement, educational savings, family security, or even a philanthropic legacy, than it is to prioritize an ever-changing set of climate goals. If you want to invest in climate change technologies, or the companies inventing them, you should. However, government agencies shouldn’t make us all pay more because of their favored political causes. ▫

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