Big Businesses SQUIRMS As Biden Imposes Tighter Control

"Tata Steel" (CC BY 2.0) by Laszlo Bartha

Biden administration has made bold promises to fight climate change. However, corporate America is resisting its government efforts to hold it to them.

At the heart of the clash about the climate change policy, a broader argument about how much control the government should have over businesses arise.

Democrats are pledging to go through the Securities and Exchange Commission to impose comprehensive financial disclosure rules on climate risk that would force thousands of businesses, including manufacturers, banks, and energy producers, to disclose information to their investors. On the other hand, lenders are set to be given higher scrutiny from their own regulators such as the Federal Reserve, including possible stress tests to gauge their resiliency to rising sea levels and extreme weather.

However, the backlash to the current administration is now beginning.

Republican lawmakers are emerging as allies to businesses resistant to the impending transparency rules that the Biden administration could impose.

The top Republican on the House Financial Services Committee, Rep. Patrick McHenry, said, “This is about solving a societal problem that does not align simply with the SEC’s mission.” He added, “I’d like the Securities and Exchange Commission to stick to what they do and then for us in the elected class to make these large-scale societal decisions.”

At the heart of the conflict, there is a broader argument concerning the amount of control that the government should have over the business. This debate will get more heated as President Biden’s administration moves to impose stricter regulations on the economy after previous rollbacks in the past four years.

Meanwhile, the reluctance to embrace the government’s growing role in climate policy is echoed by businesses and groups in Washington, D.C., as they call for flexible disclosure requirements.

The campaign being pushed by Democrats is anticipated to trigger an intense and sudden lobbying saga as companies try to develop regulations that would allow them to publicly quantify their carbon footprints, potential financial losses from climate-related risks, and their plans for making their operations more environmentally sustainable.

Stephen Brown, a veteran energy industry consultant who ran the federal affairs office of oil refiner Tesoro for 12 years, said, “There are some who care, but they don’t want to be told what to do. There are others who would like to be told how to do it.”

While some companies will try to resist government intervention, business representatives say the methods used to measure and report climate influences are still developing. It may be a risk to codify them into federal rules.

Dorothy Donohue, deputy general counsel at the Investment Company Institute, said that the group had not considered whether climate disclosure should be mandated by the SEC. Donohue said, “Is there a need for the SEC to replicate that in a rule? Once you put it in a rule, it’s a whole lot harder to change.”

In particular, banks are concerned about the idea of being forced to disclose the carbon footprint that they could generate indirectly through their loans to fossil fuel producers.

Lauren Anderson, Senior Vice President of Bank Policy Institute, said, data reporting on more direct sources of carbon emissions “is not entirely comprehensible and comparable” and that measuring the production of emissions further down the corporate chain is “exponentially harder,” with risks of double counting.

She said, “This is an incredibly difficult task. That’s not to say institutions won’t get there, but I think at the moment when those numbers are being disclosed, I think people take them with a large pinch of salt.”