US lawmakers are pushing regulators on Wall Street over coming climate rule

By Douglas Gilison

(Reuters) – Republican lawmakers on Wednesday called on Wall Street’s top regulator to justify its agency’s efforts to regulate companies’ climate disclosures and criticized the US Securities and Exchange Commission for what they called rash rulemaking .

Speaking before a House panel that oversees federal spending, SEC Chairman Gary Gensler defended the agency’s call for a 12% budget increase in response to growing financial markets growth and rising risks of wrongdoing.

Gensler said that with the increasing frequency of stock trades and the volume of privately managed assets, “we need to be able to master the fight against bad actors.” He also described the cryptocurrency markets as a “wild west” that is “riddled with noncompliance.”

It was his first statement since Republicans took control of the lower chamber of Congress in November, sweeping some of his most outspoken critics into a majority.

Conservative lawmakers and commentators have branded Gensler as an interventionist regulator who saddles markets with left-leaning social policies that have nothing to do with making money.

The SEC last year proposed requiring public companies to disclose climate-related financial impacts, including physical risks from weather events and carbon emissions from them, their utilities and their suppliers. The agency cited widespread demand and an emerging consensus among international regulators.

Industry has strongly opposed aspects of the rule, including farmers who fear they may have to report emissions to customers who fall under the rule. Republican lawmakers have also repeatedly challenged the securities regulator’s statutory authority to mandate climate disclosures.

“With this climate change, why is the SEC interfering in emissions?” asked Republican Jerry Carl of Alabama. “I’m not a fan of that.”

Gensler said investors by and large are now demanding climate disclosures and many companies are providing disclosures.

“Our job is to ensure that these disclosures … that investors receive are not misleading,” he said.

Carl cited Gensler’s earlier comments that the definition of so-called Scope III emissions outlined in the 2022 proposal, which would govern the carbon generated in companies’ supply chains, was “not well developed,” prompting speculation that the commission was diluting or could completely eliminate this part of the proposal, as called for by some in sectors such as retail and aerospace.

Gensler said he didn’t want to “bias” the rulemaking process. “An attempt is made to provide some consistency to these disclosures,” he said.

Gensler portrayed the $2.4 billion claim for fiscal 2024 as a sign of continued recovery from the decline. Under former President Donald Trump’s administration, headcount fell 4%. With around 5,300 positions currently, according to Gensler, the staffing of the agencies is only 3% larger than before Trump took office.

Lawmakers asked him about the conclusions of a recent internal watchdog report that staff attrition and heavy workloads are threatening the quality of rulemaking.

Gensler said the turnover was driven in part by the attractiveness of SEC employees in a competitive job market.

“We currently have about 6% turnover, which is consistent with other agencies,” he said.

The final budget will be set by a tightly divided Congress, now deadlocked over raising federal borrowing limits. The SEC routinely tells lawmakers that its budget is “deficit neutral” because its spending is offset by transaction fees charged by the markets.

(This story has been refiled to say Gensler, not Genslers, in paragraph 3.)

(Reporting by Douglas Gillison; Editing by Richard Chang and David Gregorio)

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