Rep. Casten pushes climate disclosure bill to strengthen SEC’s hand

Rep. Sean Casten, D-Ill., would like to get some Republicans behind his legislation that would require public companies to disclose business risks posed by climate change but he said it’s more important to advance the measure to support the Securities and Exchange Commission’s work on the issue.

On Thursday, the House Financial Services Committee approved Casten’s bill, the Climate Risk Disclosure Act, on a Democratic party-line vote.

The legislation is advancing to the House floor as the SEC is taking public comments on the idea of increasing requirements for climate-risk and environmental, social and governance disclosures, which are currently voluntary.

Democrats hold narrow majorities in the House, where the bill is likely to pass, and the Senate, where prospects are murkier for a companion bill written by Sen. Elizabeth Warren, D-Mass.

“It’s important for us to give the SEC the force of law to do what they’re going to any way and make sure that that sticks in subsequent administrations,” Casten said in an InvestmentNews interview. “So I think it’s important for us right now to push as hard as we can. If that means passing with a very skinny majority in both chambers, so be it. If we instead choose to whittle this down so that we can get a few more cross-aisle votes, we might set the planet back.”

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The measure directs the SEC to issue rules within two years requiring companies to report greenhouse gas emissions, fossil-fuel-related assets and the impact of climate change on valuation. Bill backers say it is necessary to help investors understand climate risk and push companies to address it.

But Republicans on the House committee accused Democrats of pushing a climate agenda through securities laws.

The bill would use “the SEC’s disclosure regime in an attempt to achieve a predetermined, congressionally directed social goal is how I see it from what you’ve put down on paper here,” Rep. Bill Huizenga, R-Mich., said during debate on the bill. “Is that your intent?”

Casten responded: “I didn’t say that this was a morally determined social goal. What I said is that there are investors who want to know the risk they’re exposed to and how to hedge against it.”

Huizenga also questioned whether climate-risk disclosure is material to investment returns. He asked Casten how many shareholder resolutions requiring information mandated by the bill have won a shareholder vote.

“I think the meaningful point is that one-third of assets under management are ESG funds right now, so shareholders clearly care,” said Casten, a scientist and former executive at clean energy companies.

Republicans also argued that it was premature to require disclosures when there is confusion about the definition of climate risk.

Rep. French Hill, R-Ark., offered an amendment that would have required the SEC to conduct a study on climate risk disclosures. It was voted down.

“How do you mandate something that is not agreed upon?” Hill asked.

Rep. Andy Barr, R-Ky., offered an amendment that would have required climate disclosures only if they’re material to investment returns. It, too, failed.

Barr said that he wants to avoid burdening investors “with an avalanche of trivial information.”

Last month, committee Republicans voted against a measure written by Rep. Juan Vargas, D-Calif., that would require companies to report ESG metrics and describe how they affect business results. It also is awaiting a vote by the full House.  

The debate over his bill was collegial, Casten said, and he will try to gain Republicans' support.

“French Hill and Andy Barr are pretty reasonable guys on this and they’re pretty thoughtful,” Casten said. “I expect we’ll have continued conversations on the floor. I don’t know how persuasive I’ll be.”

But the lawmaker, who represents a district in suburban Chicago, said advancing the bill is paramount.

“The only thing that matters is whether our grandchildren are proud of us,” Casten said.