Analysis by Energy Workforce President Tim Tarpley
After a long wait and plenty of anticipation, April has come and gone, and the SEC has still not released a final ESG disclosure rule as had been expected by many. Most analysts that have been following the drafting of the rules had indicated the rules would be released sometime in April. These rules are expected to be some of the most impactful regulations released by the agency in many years, certainly since the Dodd-Frank reforms following the financial crisis. Depending on the details, these rules will certainly affect the energy services sector as well as many other sectors of the U.S. economy.
While the agency itself has been quiet as to the apparent delay and any indication about an expected timeline, we got some clues as the former SEC Commissioner Robert Jackson spoke on Thursday of last week.
Jackson, who was a liberal independent who left the Securities and Exchange Commission in 2020, said a release of the final climate disclosure rules “looks more like the fall.” Jackson said he had expected the SEC to finish the climate rules within the next two months. But the former commissioner now thinks that given the complexity of the undertaking, more time will be necessary.
“The reason is that it’s a crucial rule that requires thoughtful, detailed staff policymaking,” Jackson said at a forum hosted by Watershed, a carbon accounting company. “They’ve gotten lots of good comments that give them an opportunity to make the rule the best possible rule it can be.”
It is important to remember that the SEC itself has not confirmed this new timeline. In fact, SEC Chair Gary Gensler has repeatedly declined to give a timeline for finishing the rules or say how closely the Agency’s 2022 climate disclosure proposal will match the final rules.
While the SEC is (at least technically) not a political entity, it does mean that the final rule is going to be released closer to the 2024 presidential and congressional elections. This will certainly mean that the rule, if and when it is released, will face a disapproval resolution in the House (and potentially Senate) which will be a highly watched and politically driven vote.
Even with the late timing, the rule is expected to survive a veto override of any potential Presidential veto. We can also expect this rule to play a starring role in the 2024 primary and presidential election itself with candidates on the Republican side likely promising to repeal the rule should they be elected.
Of particular concern to our Energy Workforce companies is whether or not Scope 3 is included and if so, how much of the original proposal the SEC chooses to retain in this section. This section is certainly the most complex and will ultimately be the most politically charged, so it is very possible that elements of this section may ultimately survive the final draft.
We have gotten some indications from the SEC that they may pull back the Scope 3 elements; however, we should be hesitant to put to much credibility in any statements until we actually see the final rule given how much uncertainty still surrounds this process. Energy Workforce will continue to follow these actions by the SEC and will work with our companies to prepare and respond to the rule if and when it is ultimately released.
Tim Tarpley, Energy Workforce President, analyzes federal policy for the Energy Workforce & Technology Council. Click here to subscribe to the Energy Workforce newsletter, which highlights sector-specific issues, best practices, activities and more.