The committee took aim at a rule proposed by the Securities and Exchange Commission (SEC) that would make it easier for investors to judge the climate risk of the companies they invest in.
Over the past decade, there has been an increasing push from investment firms for greater disclosure of information around corporations’ impact on climate change, as well as their exposure to associated risks.
Committee Democrats criticized Republicans for what they characterized as attacks on the free market.
“For over 100 years, the followers of Leon Trotsky and the Socialist Workers Party have waged war against the capitalist model. Today, elements of the Republican Party join them in that effort,” Rep. Brad Sherman (D-Calif.) said.
“Ronald Reagan would be ashamed,” he added.
But Republicans have rallied around the idea that using federal financial regulation to address climate concerns costs investors money.
“Forcing lower returns on Americans who are trying to build a secure financial future is wrong,” Rep. Bill Huizenga (R-Mich.) told the committee.
Democrats, in turn, contended that considering such factors saves investors money over the long term — and that moreover, investors are demanding this disclosure data.
A key point in this campaign came in 2022, when the SEC proposed rules requiring companies to disclose how “extreme weather events affect their finances,” according to The Associated Press.
Firms would have also needed to “lay out plans for reducing climate risks and outline any progress made in meeting climate-related goals,” the AP reported.
The Republican campaign against these rules has led the SEC to consider limiting them — triggering a letter from 51 worried Democratic congressional members urging them not to do so.
In Wednesday’s hearings, GOP members cast these rules as both burdensome and unnecessary. They also characterized it as an attempt to sneak climate policy in the back door.
“These days, it seems like our SEC is more of the Securities and Environment Commission,” Rep. French Hill (R-Ark.) told the committee.
But Hill argued that this level of disclosure would be impossible for businesses to meet, noting that businesses regularly recount their struggles to comply with a 2012 SEC rule that prohibits sourcing materials that fund armed groups.
Meeting climate disclosure requirements would be even harder for those firms, Hill contended.
That’s a point to which Sherman conceded — at least in part. The current set of standards and practices used by the accounting profession took centuries to develop, he noted.
“Sometimes in our fervor to give people information that they want about the environment, we overlook how difficult it will be for that information to be comparable — and auditable,” the California Democrat said.
But he pushed back on the GOP message that shareholder returns are the only factors that should generate concern among businesses and the SEC.
Conservatives, Sherman noted, once pushed for divestment from Iran, and many currently want to bar U.S. firms from selling top-level artificial intelligence software to China — even if such transactions might be good for shareholders.
“Some people think the environment is important,” he said. “Some people think whether the Chinese Communist Party gets the most technical AI information is important.”
