May. 10, 2022
**** **** May 10, 2022 In its current form, Rule S7-10-22 will degrade the quality of financial information available to investors, do little for the climate, and ultimately harm Americas now struggling middle class because of rising inflation, exorbitant energy costs, and a stagnant economy. It seems like an obvious time for our financial regulators to focus on fulfilling their own mission ensuring the soundness of our financial system instead of adopting a new one at the behest of the environmental extremists. The concept of a mandatory climate disclosure rule has been in Washington, D.C., for a long time but consistently failed to gain traction in the halls of Congress. Advocates will argue the rule is needed to help the market know of and, therefore, appropriately price climate risk. However, existing SEC disclosure rules already require that companies disclose material risks including climate. In 2010, the SEC issued guidance to help companies incorporate climate risks into their existing disclosure responsibilities. Others will argue this rule is needed to cut emissions but again, we are already doing this. The U.S. leads the world in greenhouse gas emissions reductions, representing the largest absolute decline among all countries since 2000, according to the International Energy Agency. To the extent any additional regulatory action is justified, it should come out of the U.S. Environmental Protection Agency with input from its technical environmental experts, not the SEC. The lone dissenting commissioner of the SEC who voted against the rule aptly stated, We are not the Securities and Environmental Commission. It is a clear misuse of resources to have financial specialists reviewing environmental engineering specs and vice versa. Without substantive justifications for this rule, advocates will finally suggest its for consistency and transparency. This too is unfounded. The real purpose of the rule is to move capital away from traditional energy investments, such as oil and natural gas. Referred to as ESG (environmental, social, and governance) investments on Wall Street, this strategy is one of the reasons we are experiencing such high gas prices. A report last year from the International Energy Forum estimates that in 2021, oil and gas production remained 23% below the pre-pandemic level of $525 billion, while investment slumped by 30% in 2020. The report identified ESG investing and changing regulatory signals to the capital markets on fossil fuel production as one of the primary contributors to investment remaining below whats needed to meet demand. Now, with the SEC rule and the backing of the federal government, the politically-based ESG movement stands to be turbocharged. Woke corporatists within the current administration may feel good about themselves, but their actions will harm the quality of information available to investors as well as the outcomes of affiliated investments. As we have already seen, the effects go far beyond the investor class and harm everyday people. The very industries the SEC rule is designed to undercut - fossil fuel energy, in particular - are the ones we need the most for recharging the economy and regaining a respectable degree of national security. If the Biden administration were serious about cutting energy prices and lessening the burdens of his high-cost economy, our President should immediately halt the SEC rule. With the Democratic climate agenda stalled on Capitol Hill and a push for anti-fossil fuel policies, the Biden administration will put more pressure on D.C. regulators to get the job done. In 2014, these same circumstances led to the promulgation of the Democrats Clean Power Plan currently under review by the Supreme Court. Whether environmental or financial, agencies must act consistently within authorizing laws and, importantly, respecting their limits. Without some clear action by Congress, the SEC is on a legally murky path that must be challenged. Please, do not pursue this partisan, unscientific, political agenda. Thank you. ****