Securities and Exchange Commission Chairman Gary Gensler focused much of his comments Tuesday on the topic of climate disclosure, a theme of increasing importance for not only corporate but municipal issuers as well.
Gensler was speaking at the Securities Industry and Financial Markets Association’s Annual Meeting on Nov. 2. The SEC is working on an expanded climate change disclosure regime for public companies which Gensler said will take into consideration the lack of long-term data on the issue.
The regime won’t apply to the muni market but given the intense interest in this topic by Commission, it is still important for the muni market to consider.
When asked by John F.W. Rogers, chair emeritus, SIFMA board of directors and executive vice president at Goldman Sachs on whether his climate disclosure regime will resemble those of the Commodities Futures Trading Commission’s climate mandates, which included a phase-in element and which Gensler helped develop, Gensler agreed.
“Yes,” Gensler said. “What we’re looking at is trying to put something in front of my five member commission, and with the support of the commission, out to the public to say ‘here is a mandatory regime of issuer disclosure, some qualitative disclosure around governance strategy and risk management, but also some quantitative disclosures around greenhouse gas emissions and as you mentioned, transition planning.”
“If a financial firm or a non financial firm says we’re going to be doing this by 2030 or 2050, how are they managing? How are they risk assessing their own path to their own commitments?,” Gensler said.
Gensler also mentioned he’d like to hear from the public on how he can better understand transition planning from fossil fuels to renewable energy, and how they can better manage climate-related data.
In 2010, then-chairperson of the SEC Mary Shapiro put out guidance on climate risk disclosures and Gensler very much views his strategy as building on this.
“Here we are 11 years later and the market is actually asking for more,” Gensler said. “Investors with trillions of dollars of assets under management are asking for more and on the other side, hundreds if not thousands of issuers now around the globe are making voluntary disclosures.”
He hopes that in ten years time, his successor will be building on the work they’re currently doing, especially as more data becomes available.
Muni issuers won’t be subject to the same rules due to federal law prohibiting the SEC from mandating pre-issuance disclosure by muni issuers. But muni issuers may still be requied to provide certain types of disclosure in an antifraud context.
In recent weeks, a few muni market participants have come forward to recommend that the Commission provide flexible and non-prescriptive guidance on climate disclosures for munis, similar to the May 2020 guidance for COVID-19 related disclosures.
Despite her leaving the Commission in the coming months, SEC Office of Municipal Securities Director Rebecca Olsen said she didn’t know of anything of the sort coming down the pipeline.
But other agencies are taking the matters of climate change just as seriously, as Secretary of the Treasury Janet Yellen is helping to represent the U.S. in Glasgow, Scotland as part of the COP26 climate summit. Her deputy secretary of the treasury Wally Adeyemo, in an earlier panel at SIFMA’s Annual Meeting, doubled down on the imperative for all market participants to help to meet the country’s climate goals.
“The key component of this [Build Back Better] package is around what we can do to finance the innovation and transition that’s needed in order for us to reach net zero,” Adeyemo said. “But in order for us to do this, we recognize government financing is not enough,” he added. “Ultimately, the private sector has got to finance this transition to net zero.”