Biden ESG rule goes on the back burner: States’ rules come to the forefront

The Biden administration is delaying finalization of a controversial Securities and Exchange Commission (SEC) rule on climate change-related disclosures until the fall. The upshot is there’s little chance the regulation is finalized and goes into effect during Joe Biden’s first term.

The fate of this and other environmental, social and governance (ESG) rules like it will depend heavily on Biden winning reelection and (most likely) on the Democrats retaining control of the Senate and taking back the House. Vulnerable Democrats in the Senate aren’t on board, notably Joe Manchin of coal-rich West Virginia.

Upwards of 25 GOP-led states are against ESG provisions that favor wind, solar and other renewable fuels at the expense of coal, oil and natural gas. A few states have severed ties with pension funds managed by Blackrock, the chief Wall Street leader of ESG, to preserve fossil fuel production and reliable energy and electricity.

Rule adds red tape, high costs to industry’s full plate

The SEC received thousands of comments on the proposed rule, according to S&P Global, including many from elected officials complaining the SEC overreached.

Publicly traded companies would have to disclose scope 1 (direct), scope 2 (indirect) and scope 3 (related to vendors and suppliers) greenhouse gas emissions and how they may be contributing to climate change. Small- to mid-sized businesses such as ethanol companies say reporting will be too expensive and burdensome.

Close to 60% of businesses have started generating ESG reports, according to Workiva. Seventy percent of publicly traded businesses that have made ESG pledges and/or climate change action goals are collecting data and reporting to their shareholders what actions they’re taking.