President Joe Biden’s nominee to head the Securities and Exchange Commission indicated Tuesday that he would likely support new rules to force corporations to disclose their political spending activities and workforce diversity, and tighten disclosures around climate change, policies that critics fear would make businesses more susceptible to political pressure from the left.
At his Senate confirmation hearing, Gary Gensler signaled support for these new disclosure rules long sought by Democrats and activists. For years, the S.E.C. has resisted instituing such requirements on the grounds that they go beyond protecting shareholder interests. Critics say they merely serve to pressure companies to adopt the left’s orthodoxy on climate, diversity, and political spending. More recently, however, some of the biggest investors, such as the $8.7 trillion BlackRock, have also been pushing for these disclosures.
Companies already have to disclose climate change risks to their businesses but some progressives want more detailed disclosures, including reporting on how much energy a company uses from fossil fuels and renewable energy sources.
Senator Pat Toomey of Pennsylvania, the top Republican on the Senate Banking Committee, asked Gensler if he believed the SEC could require a company whose energy bills are low-enough that they are not financially significant to report how much of their energy use comes from renewables.
Gensler did not answer directly and said that disclosure requirements will be based on the concept of materiality. But in the exchange that followed, he seemed to lean toward the idea that further and more detailed disclosures were likely appropriate.
This was followed by Sen. Elizabeth Warren (D-Ma.) asking whether there is any reason why companies should be able to hide their climate risks from investors.
“No, they should not,” Gensler said.
Sen. Bob Menendez (D-N.J.) asked Gensler about whether political contributions represented “material” information that should be disclosed. Gensler said there was rising demand from investors for the information.
Conservative critics warn that such disclosures are not intended to inform investors about actual risks to the business but to allow pressure groups to target companies for using fossil fuels, to reduce donations to conservative think tanks and politicians, and to empower trial lawyers to sue companies for inadequate disclosure.
Asked about whether the SEC should require companies to disclose information on workforce diversity, Gensler did not answer directly but hinted at support for more detailed disclosures by adopting the framework that broader human capital matters are material to investors.
“I think human capital is a very important part of the value proposition in so many companies,” Gensler said.