Congressional Republicans Maneuver to Block SEC’s Climate Rules

Congressional Republicans are acting swiftly in an attempt to strike down a landmark SEC regulation requiring companies to disclose their greenhouse gas emissions to investors.

Rep. Bill Huizenga (R-Mich.) and Sen. Tim Scott (R-S.C.) have been prepping for a congressional maneuver to rescind the regulation since the rule was proposed almost two years ago, Huizenga said.

The procedure, called the Congressional Review Act, allows Congress to dismantle any agency regulation the majority disapprove of. Huizenga said in an interview that he has placeholder text ready to go.

“We’re not starting from scratch here,” he said. “We’ve got a running start at this.”

The efforts in Congress come as the SEC finalized its rule Wednesday, removing a major piece of the draft proposal that would have required companies to disclose the emissions from their suppliers and consumers, known as Scope 3 reporting.

At the same time, House Financial Services Chairman Patrick McHenry (R-N.C.) announced a pair of hearings in March and April to “hear directly from Americans who will be impacted by this disastrous rule,” he said in a statement.

In the Senate, Scott announced in a press release that he intends to use the CRA procedure to “fight this rule and protect economic opportunity for all Americans.”

Huizenga said Republicans will use the same playbook employed to strike down another environmental, social and governance regulation led by the Department of Labor that lets investment professionals use ESG to advise their clients. That effort cleared both the House and Senate, but was vetoed by President Joe Biden.

Democrats’ Mixed Messages

Outgoing West Virginia Democratic Sen. Joe Manchin said if a CRA resolution comes to the Senate floor, he will vote for it because the SEC rule amounts to “too much overreach.”

Fellow moderate Jon Tester (D-Mont.) praised the final rule, however, saying in a press release that the SEC’s exclusion of Scope 3 was a win for his constituents and fellow farmers who would have been burdened by too much paperwork.

“I’m proud to have declared this requirement dead on arrival and to have fought every step of the way to stop it in its tracks,” Tester said.

Co-chairs of the Sustainable Investing Caucus, Reps. Juan Vargas (D-Calif.) and Sean Casten (D-Ill.), expressed confidence that any CRA resolution would be defeated—either in Congress or by Biden.

“There will be a show of protests from those who are afraid of progress,” Casten said. “We will get through it just like every other CRA they can produce this term.”

Other Democrats said they were disappointed that Scope 3 didn’t make the final rule. Sen. Elizabeth Warren (D-Mass.) said investors have been asking for broader climate-risk disclosures. Leaving supply chain and consumer emissions out of the rule was a “mistake,” she told reporters Wednesday.

“Republicans have thrown in with the corporations that don’t want to have to reveal their climate filth,” she said. “The threat that they will use more devices to prevent any regulations from coming into effect is very real.”

If the GOP fails to pass a CRA resolution, there is still a slim chance if Biden loses his re-election bid that a Republican administration could stop the rules.

Hogan Lovells Partner Brian O’Fahey said courts could issue an injunction against the rules and delay their implementation, allowing more time for Congress and a new administration to rescind them.

“As a practical matter, I don’t think there’s any risk here of the Congressional Review Act really being the basis for the rules having a problem,” O’Fahey said. “That said, I definitely would expect there to be many court challenges around the rules.”