After finalizing its controversial climate disclosure rule last month, the Securities and Exchange Commission (SEC) decided to pause implementation this week pending a challenge in the Eighth Circuit Court of Appeals. 

“The Commission has determined to exercise its discretion to stay the Final Rules pending the completion of judicial review of the consolidated Eighth Circuit petitions,” the agency said. “[The] Commission will continue vigorously defending the Final Rules’ validity in court and looks forward to expeditious resolution of the litigation. But the Commission finds that, under the particular circumstances presented, a stay of the Final Rules meets the statutory standard.” 

The finalized rule, which nixed provisions to track Scope 3 indirect (upstream and downstream) emissions across the value chain of the reporting company, still mandates most publicly traded companies disclose and track their carbon emissions. 

Recently, our Center for Energy and Conservation signed onto a coalition letter urging the agency to abandon its final rule. And I also issued a statement in response: 

While the Securities and Exchange Commission (SEC) watered down its original rule mandating indirect Scope 3 (upstream or downstream) emissions reporting for publicly-traded companies, the agency isn’t abandoning its misguided commitment to the Environmental, Social, and Governance (ESG) movement. The SEC knows ESG investing practices are unpopular, hence the delayed roll-out of the rule two years later.  Nevertheless, our Center is greatly concerned about SEC regulating non-financial goals like ESG that fall out of its purview.

As we have observed, mandatory ESG reporting discourages investment in conventional energy and deters entrepreneurs from innovating—especially in energy and agriculture—due to higher start-up costs. In February, the Buckeye Institute reported that ESG net-zero policies—including mandating climate disclosure reporting—will, at minimum, increase farming operational costs by 34%. 

Per our friends at the State Foundation Officers Foundation (SFOF), ESG investing not only puts more inflationary pressures on companies but has consequences involving the government picking good and bad ESG companies: “Beyond simply adding costs for every company, which will have an inflationary effect, this reporting system by design will lend itself to a grading system whereby ‘good ESG’ companies will be rewarded and supposedly bad ones will be punished. Investment dollars – capital – for businesses to grow will be the primary reward, and its absence, the punishment. Though undefined at present, government response is almost certain. Armed with this information, federal agencies will be obliged to set ESG standards, enforced by fines or other punitive measures.”

It’s undeniable that ESG—especially the environmental prong—contributes the most to inflation due to unreasonable net-zero decarbonization demands. By pivoting away from conventional energy or agriculture practices, a negative chain reaction leads to higher energy and food prices that are ultimately passed down to consumers. 

To learn more about the SEC rule’s effects on your life, go HERE.