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May 31, 2022
President Joseph R. Biden Jr.
The White House
1600 Pennsylvania Ave NW
Washington, DC 20500
Chairman Gary Gensler
U.S. Securities and Exchange Commission
100 F Street NE
Washington, DC 20549
Subject: Joint Governors’ Comment on SEC Release Nos. 33-11042 & 34-94478, The
Enhancement and Standardization of Climate-Related Disclosures for Investors, 87 Fed. Reg.
21,334 (File No. S7-10-22)
Dear Mr. President and Chairman Gensler,
On March 21, 2022, the U.S. Securities and Exchange Commission (SEC) proposed a rule that would
compel publicly traded companies to make detailed disclosures about climate-change risks and greenhouse
gas emissions. As governors, we are deeply concerned your proposed rule veers far outside the SEC’s
authority as a federal agency. The proposed rule will harm businesses and investors in our states by
increasing compliance costs and by larding disclosure statements with uncertain and immaterial information
that the federal government—let alone the SEC—is not equipped to judge. We strongly urge you to
withdraw the proposed rule and allow the market to continue serving as the appropriate mechanism for
judging climate risk, as it does for other types of market risks.
As your colleague, Commissioner Hester M. Peirce, eloquently explained in her dissenting statement:
“The proposal turns the disclosure regime on its head. Current SEC disclosure mandates are
intended to provide investors with an accurate picture of the company’s present and prospective
performance through managers’ own eyes. ... The proposal, by contrast, tells corporate managers
how regulators, doing the bidding of an array of non-investor stakeholders, expect them to run their
companies. It identifies a set of risks and opportunities—some perhaps real, others clearly
theoretical—that managers should be considering and even suggests specific ways to mitigate those
risks. It forces investors to view companies through the eyes of a vocal set of stakeholders, for
whom a company’s climate reputation is of equal or greater importance than a company’s financial
performance.”
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Re: File No. S7-10-22
May 31, 2022
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We agree. It is perfectly fine for companies to voluntarily disclose their perceived exposure to climate
risks, and many of them already do so under existing SEC guidance when such risk is deemed material to
the value and risk of the company’s securities. However, since climate change models vary dramatically,
the notion of evaluating investment risk based on such uncertain variables is inherently subjective and
unreliable. Moreover, such disclosures would serve to confuse investors as to how to judge true financial
risk, significantly reducing market efficiency. It is precisely the type of question where government should
not impose its own judgments of what constitutes material risk in place of managers’.
The unprecedented level of federal overreach makes your proposed rule an especially dangerous step. The
SEC’s congressionally directed mission is to protect investors, facilitate capital formation, and maintain
fair, orderly, and efficient markets. The proposed rule degrades and undermines that mission by injecting
subjective political judgments on climate policy into corporate disclosures, in a manner calculated to harm
the states that provide for America’s energy security.
The proposed rule appears part of an ongoing effort across the federal government to penalize companies
involved in traditional energy development. Until recently, the Biden Administration explicitly refused to
issue new oil and gas leases on federal lands and is now considering only a fraction of the lands that should
be available. In addition, the Council on Environmental Quality is rolling back reforms to the
environmental review process, the President has denied key pipeline and other permitting applications, and
officials throughout the Biden Administration are rhetorically discouraging investment in oil and gas
development. The proposed rule adds to that misguided agenda by distorting the mission of a key regulatory
agency.
The approach in the proposed rule is especially foolish at a time when the cost of energy, and everything
that depends on energy, has skyrocketed. Americans are struggling to pay their bills during the worst
inflation in decades, and they expect their federal leaders to do everything possible to bring down prices,
not place additional burdens on businesses and increase the uncertainty they face.
We strongly urge you to withdraw the proposed rule.
Sincerely,
Governor Spencer Cox
State of Utah
Governor Kay Ivey
State of Alabama
Governor Mike Dunleavy
State of Alaska
Governor Doug Ducey
State of Arizona
Governor Asa Hutchinson
State of Arkansas
Governor Brad Little
State of Idaho
Governor Kim Reynolds
State of Iowa
Governor Tate Reeves
State of Mississippi
Governor Mike Parson
State of Missouri
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Re: File No. S7-10-22
May 31, 2022
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Governor Greg Gianforte
State of Montana
Governor Kevin Stitt
State of Oklahoma
Governor Mark Gordon
State of Wyoming
Governor Pete Ricketts
State of Nebraska
Governor Kristi Noem
State of South Dakota
Governor Doug Burgum
State of North Dakota
Governor Greg Abbott
State of Texas