A proposed climate disclosure rule is not targeted at farmers, the chair of the Securities and Exchange Commission told members of the Senate Banking Committee at a hearing Thursday.

“There’s no goal to touch farmers in any of the states you represent -- or ranchers,” Gary Gensler told Sen. Steve Daines, R-Mont., in response to questions about reporting requirements for Scope 3 emissions — essentially, “downstream” or supply chain emissions, Gensler said, as opposed to Scope 1 and 2 emissions, which represent companies’ own emissions and energy usage.

During the hearing, Gensler repeatedly tried to downplay the proposed rule’s potential impact on Scope 3 reporting requirements, saying they only apply to public companies if they have pledged to reduce such emissions or if those emissions are expected to have a “material impact” on their businesses.

Responding to Sen. Jon Tester, D-Mont., Gensler acknowledged the serious concerns expressed by state farm bureaus. The SEC head said he had discussed the matter with American Farm Bureau Federation President Zippy Duvall, and added, “We're taking a very close look at that amongst our 14,000 other comments.”

SEC officials met with representatives of AFBF, the National Cattlemen’s Beef Association and National Pork Producers Council in May.

After the hearing, Travis Cushman, AFBF's deputy general counsel, litigation and public policy, said in a statement, “We are encouraged that SEC Chair Gensler recognized AFBF’s concerns with the proposal and are hopeful the SEC will publish a final rule that ensures farmers will never be responsible for tracking and reporting their operational data to Wall Street.”

The National Cattlemen's Beef Association's chief counsel, Mary-Thomas Hart, said after the hearing, that the proposed rule "would require data that simply does not exist at the farm or ranch-level and increases the regulatory burden on individual cattle producers. We urge the SEC to limit their proposed rule to avoid unintentional impacts to farms and ranches.”

Tester said he sells grain to public companies and expressed concerns about the impact of the rule on the “little guy.”

“The intent, senator … whether it's the farm community or other community, if they're not public companies, they’re not under this rule,” Gensler said, also mentioning “safe harbor” language in the proposal that provides liability protection for Scope 3 reporting.

Farm groups have been highly critical of the proposal, with some even calling on the SEC to withdraw the entire rule, or at least the Scope 3 requirement.

“The SEC’s proposed rule is well out of the scope of the commission’s regulatory mandate and the last thing our nation’s farming industry needs is more costly mandates that will jeopardize our farms and food supply chain,” Betsy Huber, president of the National Grange, said in a recent opinion piece.

Sen. Mike Rounds, R-S.D., urged Gensler to take another look at the proposal. “We really do have a concern about the ambiguities that some of our farmers and ranchers have right now with what they're going to be expected to try to share with providers of products to them with regard to downstream environmental impacts,” he said.

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Gensler said he thought the proposal “had the right balance” because it only requires companies to estimate Scope 3 emissions. “We said it's only an estimate, it’s only public companies," he said. "It's only if it's material or they made a commitment to it.”

In his opening statement, Ranking Member Pat Toomey, R-Pa., said the climate disclosure rule “isn't really about informed investment decision. It's about equipping climate activists with data to run political pressure campaigns against companies, which will often be to the detriment of shareholders. The end game is to discourage capital investment in oil and natural gas and other traditional energy industries.”

Both Toomey and Daines predicted the rule would not survive Supreme Court scrutiny in the wake of a decision limiting EPA’s authority to regulate greenhouse gases from power plants.

“Ultimately, the SEC will have to answer to the courts, which should make it nervous,” Toomey said. 

Gensler didn’t just hear criticism and concern about the climate proposal. Banking Committee Chairman Sherrod Brown, D-Ohio, called the proposal “an important example of how to improve the market’s understanding of risks and to provide transparency and comparability. Clarity and uniformity are key.”

And Sen. Elizabeth Warren, D-Mass., encouraged Gensler not to back down on the Scope 3 requirements in the face of what she said is strong opposition from the oil industry. She said the proposed rule already gives companies “way too much wiggle room” in reporting their Scope 3 emissions.

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