[House Hearing, 118 Congress]
[From the U.S. Government Publishing Office]


                      BEYOND SCOPE: HOW THE SEC'S
                CLIMATE RULE THREATENS AMERICAN MARKETS

=======================================================================

                                HEARING

                               BEFORE THE

                    COMMITTEE ON FINANCIAL SERVICES

                     U.S. HOUSE OF REPRESENTATIVES

                    ONE HUNDRED EIGHTEENTH CONGRESS

                             SECOND SESSION

                               __________

                             APRIL 10, 2024

                               __________

       Printed for the use of the Committee on Financial Services

                           Serial No. 118-86
                           
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]

                               __________

                   U.S. GOVERNMENT PUBLISHING OFFICE                    
56-437 PDF                  WASHINGTON : 2024                    
          
-----------------------------------------------------------------------------------     

                 HOUSE COMMITTEE ON FINANCIAL SERVICES

               PATRICK McHENRY, North Carolina, Chairman

FRANK D. LUCAS, Oklahoma             MAXINE WATERS, California, Ranking 
PETE SESSIONS, Texas                     Member
BILL POSEY, Florida                  NYDIA M. VELAZQUEZ, New York
BLAINE LUETKEMEYER, Missouri         BRAD SHERMAN, California
BILL HUIZENGA, Michigan              GREGORY W. MEEKS, New York
ANN WAGNER, Missouri                 DAVID SCOTT, Georgia
ANDY BARR, Kentucky                  STEPHEN F. LYNCH, Massachusetts
ROGER WILLIAMS, Texas                AL GREEN, Texas
FRENCH HILL, Arkansas, Vice          EMANUEL CLEAVER, Missouri
    Chairman                         JIM A. HIMES, Connecticut
TOM EMMER, Minnesota                 BILL FOSTER, Illinois
BARRY LOUDERMILK, Georgia            JOYCE BEATTY, Ohio
ALEXANDER X. MOONEY, West Virginia   JUAN VARGAS, California
WARREN DAVIDSON, Ohio                JOSH GOTTHEIMER, New Jersey
JOHN ROSE, Tennessee                 VICENTE GONZALEZ, Texas
BRYAN STEIL, Wisconsin               SEAN CASTEN, Illinois
WILLIAM TIMMONS, South Carolina      AYANNA PRESSLEY, Massachusetts
RALPH NORMAN, South Carolina         STEVEN HORSFORD, Nevada
DAN MEUSER, Pennsylvania             RASHIDA TLAIB, Michigan
SCOTT FITZGERALD, Wisconsin          RITCHIE TORRES, New York
ANDREW GARBARINO, New York           SYLVIA GARCIA, Texas
YOUNG KIM, California                NIKEMA WILLIAMS, Georgia
BYRON DONALDS, Florida               WILEY NICKEL, North Carolina
MIKE FLOOD, Nebraska                 BRITTANY PETTERSEN, Colorado
MIKE LAWLER, New York
ZACH NUNN, Iowa
MONICA DE LA CRUZ, Texas
ERIN HOUCHIN, Indiana
ANDY OGLES, Tennessee

                     Matt Hoffmann, Staff Director
                            
                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on:
    April 10, 2024...............................................     1
Appendix:
    April 10, 2024...............................................    67

                               WITNESSES
                       Wednesday, April 10, 2024

Fisch, Jill E., Saul A. Fox Distinguished Professor of Business 
  Law, University of Pennsylvania Carey Law School...............    11
Roisman, Elad L., Partner, Cravath, Swaine & Moore LLP; and 
  former Commissioner and Acting Chairman, U.S. Securities and 
  Exchange Commission (SEC)......................................     6
Stebbins, Robert, Partner, Willkie Farr & Gallagher LLP; and 
  former General Counsel, U.S. Securities and Exchange Commission 
  (SEC)..........................................................     7
White, Joshua T., Assistant Professor, Finance, and Brownlee O. 
  Currey Jr. Dean's Faculty Fellow, Owen Graduate School of 
  Management, Vanderbilt University..............................     8
Wright, Chris, Founder, Chairman, and Chief Executive Officer, 
  Liberty Energy Inc.............................................     9

                                APPENDIX

Prepared statements:
    Fisch, Jill E................................................    68
    Roisman, Elad L..............................................    74
    Stebbins, Robert.............................................    84
    White, Joshua T..............................................    92
    Wright, Chris................................................   106

              Additional Material Submitted for the Record

Horsford, Hon. Steven:
    Las Vegas Review-Journal article entitled, ``Las Vegas home 
      prices going up 5 times faster than wages, report says,'' 
      dated January 18, 2024.....................................   118
    Nevada Independent article, ``It's time to take back our 
      housing from Wall Street,'' dated March 30, 2024...........   119
Ogles, Hon. Andy:
    Advancing American Freedom, ``Stop the Biden SEC's Climate 
      Disclosure Rule,'' dated March 25, 2024....................   121
Fisch, Jill E.:
    Written responses to questions for the record from 
      Representative Waters......................................   126
Roisman, Elad L.:
    Written responses to questions for the record from 
      Representative Waters......................................   128
Stebbins, Robert:
    Written responses to questions for the record from 
      Representative Waters......................................   129
White, Joshua T.:
    Written responses to questions for the record from 
      Representative Waters......................................   131
Wright, Chris:
    Written responses to questions for the record from 
      Representative Waters......................................   132

 
                         BEYOND SCOPE: HOW THE
                           SEC'S CLIMATE RULE
                       THREATENS AMERICAN MARKETS

                              ----------                              


                       Wednesday, April 10, 2024

             U.S. House of Representatives,
                   Committee on Financial Services,
                                                   Washington, D.C.
    The committee met, pursuant to notice, at 10:08 a.m., in 
room 2128, Rayburn House Office Building, Hon. Patrick McHenry 
[chairman of the committee] presiding.
    Members present: Representatives McHenry, Lucas, Sessions, 
Posey, Huizenga, Wagner, Barr, Williams of Texas, Hill, Emmer, 
Loudermilk, Rose, Steil, Timmons, Norman, Meuser, Fitzgerald, 
Garbarino, Kim, Donalds, Flood, Lawler, Nunn, De La Cruz, 
Houchin, Ogles; Waters, Sherman, Scott, Lynch, Green, Cleaver, 
Foster, Beatty, Vargas, Gottheimer, Gonzalez, Casten, Pressley, 
Horsford, Tlaib, Garcia, and Pettersen.
    Chairman McHenry. The Financial Services Committee will 
come to order.
    Without objection, the Chair is authorized to declare a 
recess of the committee at any time.
    Today's hearing is entitled, ``Beyond Scope: How the SEC's 
Climate Rule Threatens American Markets.''
    Before proceeding to the opening statements, I would like 
to engage with the ranking member in a colloquy. As Members 
know, we have been working to implement electronic voting in 
this committee for a number of years, in fact, in multiple 
Congresses. We have held three open houses prior to the April 
recess to educate Members and staff. We will hold another one 
after this hearing, and again tomorrow. Other committees have 
electronic voting, so members of this committee may have 
experienced it there.
    We will vote next week using electronic voting during our 
scheduled markup, and I want to take this opportunity to set up 
my expectations for how this will work for all Members. For the 
first markup only, we will conduct a quorum call to ensure all 
Members are able to use their electronic devices. From there, I 
will announce each request for recorded vote, as is the current 
practice, and open the vote for Members to cast their votes 
electronically.
    The goal here is for the electronics to be a timesaving 
device. I will work closely with the ranking member to ensure 
that all Democratic Members have cast their vote and all 
Members of the committee have the opportunity to cast their 
vote. As is the current practice, I will ask if all Members 
have had an opportunity to vote or wish to change their vote 
before closing the vote. From there, I will announce that the 
vote is closed.
    At that point, as is the current practice, I will ask the 
clerk to report. We will pause to accommodate technical issues. 
If a technical issue cannot be resolved for a Member, I will 
direct the clerk to call on that Member to record their vote 
orally. If more than five Members have issues with their voting 
devices, we will revert to calling the roll orally.
    And I would ask the ranking member if the ranking member is 
comfortable with that process?
    Ms. Waters. Oh, thank you very much, Mr. Chairman, and I 
appreciate the practice sessions that you have afforded to all 
of the Members. And what you have explained with regard to 
execution of electronic voting seems very reasonable to me. 
Now, perhaps, I need a clarification on one thing. During a 
roll call vote, sometimes Members vote in error, and the 
calling of the roll provides me and my staff with additional 
time to verify if all Members have voted as they intended. If 
requested, will you accommodate requests from me for additional 
time before closing the vote to verify if all Members have 
voted as they intended?
    Chairman McHenry. Of course. I will always work with the 
ranking member and her members to ensure votes are cast as a 
member intends.
    Ms. Waters. Thank you, Mr. Chairman, for your consideration 
on this effort, and I am looking forward to it. And I yield 
back.
    Chairman McHenry. Excellent. I want to thank the ranking 
member, and I want to thank the Democratic Financial Services 
Committee staff for working with the Republican staff on this 
matter. I know we started this initiative when she was Chair, 
pre-COVID, with the leadership of the House Administration 
Committee and Chairman Steil. I want to thank the House 
Administration Committee for making this more available to 
committees across the campus. I know other committees do this 
and do this well. And it is the intention of this committee to 
be able to move more expeditiously through votes while still 
accommodating Members' ability to vote, and I'm really grateful 
that we can close this process out and at least get rolling 
here.
    With that, I will now recognize myself for 4 minutes for an 
opening statement.
    We are here to discuss the Securities and Exchange 
Commission's recently-finalized climate disclosure rule, which 
will be disastrous for American markets, job creators, workers, 
and investors. It is costly, complex, and against the public 
good. The final rule is not a so-called compromise. It is yet 
another attempt by the Biden Administration to force its 
climate regulatory policy agenda on the public through 
financial regulation.
    I want to be clear. Climate change is real. Human activity 
contributes to it. It is a significant challenge that America 
and the world is grappling with and will continue to grapple 
with for decades to come. But this hearing is not about climate 
change; it is about the proper role of our securities 
regulator. So, when you hear Democrats accuse Republicans of 
being anti-science, they are proving our point that this rule 
is about the left's climate policy agenda, not simply 
standardizing corporate disclosures. The SEC is not a climate 
regulator, nor should it be. Congress has never authorized it 
to act as one.
    The final rule clearly exceeds the Commission's statutory 
mandate. This is par for the course with the current Securities 
and Exchange Commission. Whether it is inadequate public 
engagement, failing to comply with the Administrative Procedure 
Act (APA), attacking innovation, or issuing rules that exceed 
its authority, Chair Gensler's SEC clearly thinks it is above 
the law.
    And it is not just Republicans sounding the alarm. In the 
past 12 months, a Federal judge imposed sanctions on the 
Securities and Exchange Commission for its, ``gross abuse of 
power,'' in the DEBT Box case; the judge in the Ripple case 
criticized the Commission's lack of, ``faithful allegiance to 
the law,''; and the judge in the Grayscale case found that the 
SEC acted in an, ``arbitrary and capricious manner.'' It is 
clear that Chair Gensler's SEC is tarnishing the reputation of 
this very important institution.
    The final climate disclosure rule is yet another glaring 
example of the agency's overreach. First, the rule will 
significantly harm our markets and job creators. It will force 
public companies to decipher an 886-page rule, increasing costs 
for a public company by 21 percent, according to the SEC's own 
estimates. Many, including SEC Commissioner Peirce, have noted 
that this estimate is likely on the low end. Such a massive 
increase in compliance costs will impede firms from going or 
staying public. Oddly enough, the largest companies, often 
attacked by the progressive left, are the only ones which might 
be able to afford these enormous new costs.
    Second, the rule will crush everyday investors. Fewer 
public companies means fewer investment options for families to 
save and build wealth. Everyday investors will also be 
overwhelmed, not informed, by the amount of granular, complex, 
non-economic information required by the rule. Contrary to 
Democrats' claims, it is non-economic actors and progressive 
stakeholders who are demanding these climate regulations, not 
everyday investors.
    Finally, the climate rule will hurt American workers, who 
are already struggling to make ends meet under Biden economics. 
Increased costs will force companies to hire fewer employees, 
invest in fewer job-creating opportunities, and pass higher 
costs on to consumers.
    It is clear that the SEC's climate disclosure rule would be 
catastrophic for our markets and for American competitiveness. 
The Commission's stay on the rule is not enough. Instead, I 
urge Chair Gensler to abandon this regulatory power grab and 
return his focus to the statutory role of the SEC: protecting 
investors; maintaining fair, orderly, and efficient markets; 
and facilitating capital formation. And if he doesn't, this 
Republican House will be forced to act. I yield back.
    The Chair now recognizes the ranking member of the 
committee, the gentlewoman from California, Ms. Waters, for 4 
minutes for an opening statement.
    Ms. Waters. Good morning. According to the National Oceanic 
and Atmospheric Administration (NOAA), last year was the 
hottest year on record. Mr. Chairman, climate change is real. 
It was with the realities of climate change in mind that the 
SEC finalized its long-awaited climate disclosure rule last 
month. This rulemaking is common sense. The climate crisis 
affects the financial health of public and private companies 
and investors. We have a right to know how the companies they 
own are responding to this crisis.
    Unfortunately, MAGA Republicans don't see it this way. Not 
only do they deny that climate change is real, but they also 
don't want anyone else to acknowledge its reality, either. My 
Republican colleagues want to block America's investors from 
knowing key information about stocks and outright ban them from 
making sustainable investments. Neither Congress nor our 
regulators can ignore the impact of the climate crisis on the 
financial system.
    In California, climate change-induced wildfires are leading 
to insurance company withdrawals, premium spikes, 
cancellations, and other restrictions on coverage for people 
all across the State. Nevertheless, MAGA Republicans downplay 
the climate crisis by inviting climate deniers as hearing 
witnesses and marking up legislation that prohibits regulators 
from mitigating such risk in our financial system.
    Despite the extreme MAGA effort to ban sustainable 
investing or ESG, Committee Democrats have been pushing the SEC 
to use its clear and longstanding tools to finalize and 
implement a strong climate rule to ensure investors receive the 
information they need. I am disappointed that the SEC, under 
immense pressure from MAGA and their corporate donors, didn't 
muster the political courage to adopt a bolder rule. 
Nevertheless, the SEC's rule, once implemented, will establish 
a clear framework to standardize climate disclosures, and in 
this sense, it is historic and overdue.
    Mr. Chairman, sustainable investing doesn't just benefit 
investors. It is also good for business and serves as a key 
element of capitalism, where investors get the opportunity to 
consider the true potential risks, rewards, and impacts of the 
investments they are making. Unfortunately, the SEC rule is 
being challenged by several well-funded special interests 
trying to eliminate it entirely. These groups have succeeded in 
forcing the SEC to pause its rule while they wait for the court 
to consider the lawsuit.
    Stopping government action on climate change is consistent 
with the aims of Project 2025, Mr. Trump's subversive and 
radical agenda to kill progress, prosperity, and freedoms in 
our country. The plan includes not just dismantling Federal and 
State climate-related policies, but also gutting the 
Environmental Protection Agency (EPA), thereby making clean air 
and drinking water a luxury in our time. Committee Democrats 
will stand up to these attacks and make sure that people just 
trying to save for retirement or provide for their families 
have the information they need to make smart investment and 
economic decisions, and that Project 2025 never becomes a 
reality. With that, I yield back.
    Chairman McHenry. The gentlelady yields back. The Chair now 
recognizes the gentleman from Michigan, Mr. Huizenga, who is 
also the Chair of our Subcommittee on Oversight and 
Investigations, for 1 minute.
    Mr. Huizenga. Thank you, Mr. Chairman. Only in Washington 
can you add 350 pages of text and call it a clarification and a 
simplification. In a rush to appease the left, SEC Chair Gary 
Gensler finalized a nearly 900-page climate disclosure rule 
last month, which celebrated a, ``narrow approach.'' Look, 
let's not be fooled. The rule is still unworkable, no matter 
how much spin my Democrat colleagues put on it.
    In the 2 years since the climate disclosure rule was 
proposed, we have seen a deluge of new rules and an 
unprecedented assault on our capital markets. The Commission 
finalized the climate rule despite no clear authorization from 
Congress to do so. Although Chair Gensler has repeatedly 
reminded the public he is not a climate regulator--we agree--
under his leadership, the SEC has strayed far from its clear 
statutory mission. Investors should know that the SEC's 
overreach will significantly hurt our economy while serving as 
a boon for special interests and far-left activists. Unless he 
radically alters this approach to regulating our capital 
markets, his legacy will be that of an overzealous bureaucrat 
who has been repeatedly slapped down by the courts.
    Chairman McHenry. The gentleman's time has expired.
    Mr. Huizenga. I yield back.
    Chairman McHenry. The Chair now recognizes the gentleman 
from California, Mr. Sherman, who is also the ranking member of 
our Subcommittee on Capital Markets, for 1 minute.
    Mr. Sherman. Today's hearing is an attack on capitalism. 
Under capitalism, those with capital are given the information 
that they want, to make capital allocation decisions as they 
decide, and the government's role is to make sure that 
information is reliable and comparable, and that a material 
percentage of American investors find that climate is material 
to their investment decisions. Under anti-capitalism, central 
planners let the government decide what factors should go into 
capital allocation decisions.
    And apparently, the Majority believes that the government 
has already decided that such decisions must be made solely on 
the basis of earnings per share, and is now working to deprive 
those with different criteria from getting the information that 
they need, and instead force them to fall in line with the 
government's capital allocation decisions. Investors want the 
information, and under real capitalism, we get it for them, and 
we make sure that it is reliable and comparable. I yield back.
    Chairman McHenry. The gentleman yields back.
    Today, we welcome the testimony of our five witnesses: Mr. 
Elad Roisman, a partner with Cravath, Swaine & Moore, and a 
former Commissioner and Acting Chair of the U.S. Securities and 
Exchange Commission; Mr. Robert Stebbins, a partner with 
Willkie Farr & Gallagher, and the former General Counsel of the 
U.S. Securities and Exchange Commission; Mr. Joshua White, an 
assistant professor of finance at the Owen Graduate School of 
Management at Vanderbilt University; Mr. Chris Wright, the 
chief executive officer of Liberty Energy; and Professor Jill 
Fisch, the Saul A. Fox Distinguished Professor of Business Law 
at the University of Pennsylvania Law School.
    Welcome. We thank each of you for being here. Each of you 
will be recognized for 5 minutes to give an oral presentation 
of your testimony, and without objection, your written 
statements will be made a part of the record.
    We have a lighting system, and just like in society, red 
and green mean certain things. Yellow specifically means, hurry 
up, because we are about done.
    So with that, Mr. Roisman, you are recognized for 5 
minutes.

STATEMENT OF ELAD L. ROISMAN, PARTNER, CRAVATH, SWAINE & MOORE 
    LLP; AND FORMER COMMISSIONER AND ACTING CHAIRMAN, U.S. 
            SECURITIES AND EXCHANGE COMMISSION (SEC)

    Mr. Roisman. Thank you. Good morning, Chairman McHenry, 
Ranking Member Waters, and members of the committee. Thank you 
for inviting me to testify today, and thank you to your staff 
for helping coordinate this hearing as well. My name is Elad 
Roisman. I am a partner at the law firm of Cravath, Swaine & 
Moore, but today, I am presenting my own views and not those of 
my firm or any client of the firm. My testimony and the views I 
will express today are informed by my nearly 20 years of 
experience in both the public and private sectors, working on 
securities, regulatory, and compliance matters affecting public 
companies and other securities market participants.
    In my practice at Cravath, amongst other matters, I advise 
public companies on disclosure, governance, and compliance. 
Prior to joining Cravath, I had the distinct honor and 
privilege of serving as a Commissioner and as the Acting 
Chairman of the U.S. Securities and Exchange Commission. I was 
appointed to the SEC after serving as Chief Counsel for the 
Senate Committee on Banking, Housing, and Urban Affairs. And 
before that, I served as Counsel to then-SEC Commissioner 
Daniel M. Gallagher, as the Chief Counsel at NYSE Euronext, and 
as a corporate lawyer in private practice in New York.
    My statement today focuses on certain implementation 
challenges with respect to the SEC's newly-adopted rules 
requiring companies to disclose certain climate-related 
information and registration statements and annual reports. I 
believe that the final rules represent some of the most 
significant expansions of public company disclosure 
requirements in decades.
    Compliance with the new requirements will be a major 
undertaking for many public companies and will be costly. Some 
requirements will be particularly challenging given the 
compliance schedule mandated by the final rules. And while the 
SEC cites the goal of comparability and consistency as one of 
the primary reasons for this rulemaking, I fear that this may 
not be achieved given the different assumptions, estimates, and 
definitions that will underlie company disclosures. 
Furthermore, because some companies will make determinations of 
whether to disclose information based on evolving foreign and 
State laws, comparability and consistency will be especially 
hard to achieve.
    I believe companies will need to spend significant time and 
money in order to analyze, prepare for, and ultimately comply 
with the many new requirements of the final rules, costs that 
will ultimately be borne by investors. The final rules 
introduce a prescriptive, climate-related disclosure regime 
that is likely to result in extensive and granular disclosure 
on topics that many companies previously determined were not 
material to investors under SEC existing guidance and 
disclosure requirements.
    I hope that my testimony is helpful to members of the 
committee in highlighting some of the concerns and issues that 
public companies will be grappling with in complying with the 
final rules and some of the practical difficulties in the 
application. Thank you.
    [The prepared statement of Mr. Roisman can be found on page 
74 of the appendix.]
    Chairman McHenry. Thank you for your testimony. We will now 
recognize Mr. Stebbins for 5 minutes.

  ROBERT STEBBINS, PARTNER, WILLKIE FARR & GALLAGHER LLP; AND 
FORMER GENERAL COUNSEL, U.S. SECURITIES AND EXCHANGE COMMISSION 
                             (SEC)

    Mr. Stebbins. Chairman McHenry, Ranking Member Waters, and 
members of the committee, thank you for the opportunity to 
testify today. The views expressed in this testimony are my own 
and do not necessarily represent the views of my current 
employer, Willkie Farr & Gallagher, or any client of the firm.
    The climate rules were adopted by the SEC in March 2024 
pursuant to an adopting release of almost 900 pages. This 
followed a proposal in March 2022 that generated in excess of 
24,000 comments. A recent memo published by a leading law firm 
called the rules, ``perhaps the most controversial rulemaking 
in SEC history.'' In my written testimony, I summarize certain 
recent Federal court challenges to the SEC rulemaking and then 
provide an analysis of legal challenges to the climate rules.
    A number of the rules recently adopted by the SEC have been 
challenged in the Federal courts, and the SEC has suffered a 
number of setbacks in these cases. These cases involve the 
proxy rules, the share repurchase rules, the private fund 
advisor rules, the dealer rules, the short sale rules, and the 
securities lending rules. Many of these challenges were heard 
in the U.S. Court of Appeals for the Fifth Circuit.
    In addition, in 2022, the Fifth Circuit also ruled against 
the SEC in a case relating to the use of the SEC's 
administrative courts. This case was appealed to the Supreme 
Court, was argued in November, and a decision is pending.
    As to the current rules and the challenges, litigation 
challenging the climate rules ensued promptly after the rules 
were adopted, as expected. Petitions were filed in the Second, 
Fifth, Sixth, Eighth, and D.C. Circuits. A lottery system 
subsequently selected the Eighth Circuit to hear the 
consolidated cases, and then, on April 4th, the SEC issued an 
order staying climate rules pending the outcome of litigation 
in the Eighth Circuit.
    As to an overview of the legal challenges to the rules, 
Liberty Energy filed a motion for an administrative stay in the 
Fifth Circuit, arguing that climate rules violate three 
things--the major questions doctrine, the Administrative 
Procedure Act (APA), and the First Amendment--and the SEC filed 
a response to this motion. So, I think those two filings give a 
pretty good roadmap as to the litigation to come.
    As set forth in my written testimony, for the reasons 
described in the testimony, I believe there is a strong basis 
for the Eighth Circuit and the Supreme Court to conclude that 
the climate rules violate the major questions doctrine as set 
forth in West Virginia v. EPA. As to the APA, for the reasons 
set forth in my testimony, I believe that a reasonable basis 
exists for the Eighth Circuit and the Supreme Court to find an 
APA violation.
    And as to the First Amendment challenges, First Amendment 
challenges are extremely difficult to win against the SEC in 
connection with its disclosure program. So, I think that is 
extremely less likely to see a successful challenge as to the 
First Amendment grounds. However, if the Supreme Court did set 
aside the climate rules based on First Amendment grounds, this 
decision would be potentially devastating to the SEC and would 
put substantial legal stress on many of its other ongoing 
reporting requirements, as the SEC depends on, ``compelled 
speech.''
    My comments are in no way meant as a criticism of the staff 
of the SEC. I was General Counsel of the SEC for 4 years, and 
it was an honor to work with the SEC staff on a daily basis. I 
have the utmost respect for them. This is a rulemaking they 
were instructed to prepare, and people from my former office 
will be defending the rule in the Federal appellate courts, but 
this is a rulemaking that will be challenging for them to 
defend.
    Thank you very much. I look forward to answering any 
questions you may have.
    [The prepared statement of Mr. Stebbins can be found on 
page 84 of the appendix.]
    Chairman McHenry. Thank you for your testimony. We will now 
recognize Mr. White.

STATEMENT OF JOSHUA T. WHITE, ASSISTANT PROFESSOR, FINANCE AND 
  BROWNLEE O. CURREY JR. DEAN'S FACULTY FELLOW, OWEN GRADUATE 
          SCHOOL OF MANAGEMENT, VANDERBILT UNIVERSITY

    Mr. White. Chairman McHenry, Ranking Member Waters, and 
members of the House Financial Services Committee, thank you 
for inviting me today to discuss the SEC's climate-related 
disclosure rule. I look forward to discussing this important 
issue, with the disclaimer that my views may not reflect those 
of my employer, Vanderbilt University.
    The adopted rules will require comprehensive climate-
related disclosures, including those on governance, business 
strategy, targets and goals, greenhouse gas emissions, risk 
management, and financial statement metrics. Thus, it is 
crucial to consider the economic implications, which the SEC 
readily admits will substantially raise the direct costs of 
being a public company. The spillover effects of this rule 
could also have wide economic consequences, potentially leading 
companies to exit public markets or choose to stay private, 
reducing capital formation and job creation and limiting 
investment options for everyday investors.
    In my written testimony, I draw on my experience as a 
former SEC financial economist and my scholarly work on 
conducting cost-benefit analyses around rulemaking endeavors. I 
outline several critical issues concerning the SEC's economic 
analysis of the climate disclosure rule. I would like to draw 
your attention to three.
    First, I am concerned that the rule mandates costly and 
granular disclosures that are not economically material, such 
as Scope 1 and Scope 2 greenhouse gas emissions. This concern 
is exacerbated by the SEC's economic analysis, which ignores 
recommendations and data provided by the public. Multiple 
commenters asked the SEC to conduct an event study on 
greenhouse gas emission disclosures. An event study is the 
classic test of whether information is economically meaningful 
to investors.
    Fortunately, University of Pennsylvania professor, Dan 
Taylor, conducted such a test study and found that the average 
greenhouse gas emission disclosure does not elicit a stock 
price response that is different from zero. Thus, we can expect 
that Scope 1 and Scope 2 disclosures will provide climate 
information that does not change stock price valuations for 
most investors. Rather than acknowledging these findings and 
the economic analysis, the SEC instead pointed to an academic 
publication with data that actually predates its 2010 climate-
related guidance.
    Second, the SEC fails to make a convincing economic 
argument for prescriptive disclosures, as the existing 
principles-based system already mandates that registrants 
disclose material climate information. Studies show that 
following the SEC's 2010 guidance, registrants strengthened 
their climate risk disclosures, especially when they operated 
in industries where climate factors are more likely to impact 
their operations. The SEC's cost-benefit analysis discusses how 
climate risks are on average reflected in stock prices, likely 
due to this principles based disclosure that already exists. 
Thus, I expect that mandating additional information will 
provide limited benefits but will come at a substantial cost.
    This leads to my third point, which is that the SEC 
projects the climate disclosure rule will raise the cumulative 
disclosure burden for public companies by 20 percent. While 
this is no doubt an economically large amount, I am concerned 
that the SEC's final cost estimates are too low and do not 
capture the unintended consequences of the rule. Such a result 
would not be unexpected given that the SEC found compliance 
costs for provisions of Sarbanes-Oxley exceeded the estimates 
in the final rule by more than 350 percent.
    I believe the SEC should have re-proposed, not adopted, the 
final rule due to the substantial changes that were made, which 
would have allowed market participants to offer more precise 
compliance cost estimates following these changes.
    In closing, I am highly concerned that the climate-related 
disclosure rule will increase costs, with limited economic 
benefits for most shareholders. It can reduce the number of 
public companies, harm capital formation, and ultimately impede 
economic growth. I look forward to your questions.
    [The prepared statement of Professor White can be found on 
page 92 of the appendix.]
    Chairman McHenry. Mr. Wright, you are recognized for 5 
minutes.

    STATEMENT OF CHRIS WRIGHT, FOUNDER, CHAIRMAN, AND CHIEF 
             EXECUTIVE OFFICER, LIBERTY ENERGY INC.

    Mr. Wright. Thank you, Chairman McHenry, Ranking Member 
Waters, and members of the committee. I am Chris Wright, the 
founder, chairman, and CEO of Liberty Energy. I am also the 
author of a new report on energy and climate change entitled, 
``Bettering Human Lives 2024,'' and the founding chairman of 
the Bettering Human Lives Foundation, which is focused on 
expanding access to clean cooking fuels in Africa.
    Liberty Energy employs over 5,000 people and fracks roughly 
20 percent of the onshore wells drilled in the United States 
and Canada. We are proud to say that about 10 percent of total 
primary energy production in the United States comes from wells 
fracked by Liberty. Liberty has been a leader in next-
generation technologies that reduce our impacts. Two examples 
are Liberty's quiet frack fleets and our leadership in 
replacing diesel-powered frack fleets with natural gas fleets.
    While investors are keenly interested in our innovations 
that lower emissions of both air pollutants and greenhouse 
gases, I am not aware of any specific investor requests for 
reporting along the lines of the SEC climate rule. The SEC 
serves as an important regulator for our financial markets. 
Liberty has dealt with the SEC for many years. Both before our 
initial public offering (IPO), and for the 6 years that we have 
been a public company, we have had only positive and 
constructive interactions with the SEC. But now, the SEC is 
proposing to venture well outside of their lane without any 
congressional mandate to do so. We strongly oppose this 
destructive mission creep.
    Climate change is a complicated global issue that I have 
studied, written about, and spoken about for nearly 20 years, 
but it is certainly not in the SEC's purview. That is why about 
a month ago, Liberty instituted a challenge to the SEC's 
climate rule in Federal court and asked for the rule to be 
stayed pending this challenge. The SEC vigorously opposed the 
stay, but it was granted anyway by the Fifth Circuit. Last 
week, the SEC decided to stay the climate rule itself. We 
appreciate this gesture but remain committed to seeing this 
misguided rule dropped permanently.
    How might climate change impact Liberty's operations? 
Global average temperature has risen by roughly 2 degrees 
Fahrenheit over the last 150 years. Extrapolating the current 
rate of satellite-observed warming would imply roughly 2 more 
degrees Fahrenheit of warming by the end of this century. We 
operate at minus 30 degrees in North Dakota and at over 110 
degrees in South Texas, a range of 140 degrees. A few degrees 
warmer simply will not impact our operations.
    What about extreme weather? We work in areas where 
tornadoes visit, and hurricanes and floods, too. The United 
Nations Intergovernmental Panel on Climate Change (IPCC) 
reports no significant trend in these weather extremes. U.S. 
flood damage as a percent of global gross domestic product 
(GDP) has been on a downward trend since 1940, and global 
weather disaster losses as a percent of GDP have declined about 
20 percent since 1990. Hence, there is no obvious growing 
threat to our business from extreme weather. Nevertheless, the 
SEC's climate rule mandates that public companies now must 
spend considerable resources to track and report impacts from 
the supposed changes of extreme weather events. Why?
    In our, ``Bettering Human Lives,'' report, we tallied the 
growth in global energy production by source since 2010. 
Natural gas is the fastest-growing source of energy in 
absolute, not relative terms, supplying nearly 40 percent of 
growth in global energy consumption. Oil is the second fastest-
growing energy source. Hence, global demand for our industry's 
products is at a record high and rising. Liberty also has 
ownership stakes and partnerships with both a nuclear small 
modular reactor company and a leading next generation 
geothermal energy company. We have positive outlooks for both 
companies and their technologies.
    Where do we see climate risks for our business? In 
regulations, like those proposed by the SEC. These regulations 
will be costly to comply with and will invite litigation from a 
party seeking to hamper our industry. The net result will be to 
make it costlier and riskier to produce oil and gas in the 
United States, which surely will reduce U.S. production at the 
margin. The SEC climate rule will do nothing to reduce demand 
for oil and gas, while reducing U.S. production.
    Two results can be expected: higher costs for U.S. 
consumers and businesses; and increased oil imports. 
Outsourcing oil production to foreign countries like Iran, 
Russia, and Venezuela will certainly increase global greenhouse 
gas emissions and reduce energy security and economic well-
being. Why impose a complex regulatory rule with no apparent 
climate benefit and easily-foreseeable downsides? What am I 
missing? Thank you.
    [The prepared statement of Mr. Wright can be found on page 
106 of the appendix.]
    Chairman McHenry. Professor Fisch, you are recognized for 5 
minutes.

STATEMENT OF JILL E. FISCH, SAUL A. FOX DISTINGUISHED PROFESSOR 
  OF BUSINESS LAW, UNIVERSITY OF PENNSYLVANIA CAREY LAW SCHOOL

    Ms. Fisch. It is an honor to participate in today's 
hearing. My name is Jill Fisch, and I am a professor at the 
University of Pennsylvania Law School. As an academic, I have 
been teaching and writing about securities regulation for 35 
years. Before that, I worked for a big law firm, and prior to 
that, at the Department of Justice.
    The U.S. capital markets are unparalleled throughout the 
world for their size and quality. They are important not just 
for businesses to raise capital, but for individuals. Today, 
more Americans own stock than ever before. Many depend on the 
strength of the capital markets to secure their savings for a 
home, the education of their children, and their retirement.
    The key to this success is Congress' wisdom in creating a 
disclosure-based system and tasking the SEC with determining 
the required disclosures. In adopting the Federal securities 
laws, Congress explicitly recognized the importance of market 
integrity to the broader public interest, stating that orderly 
and efficient capital markets contribute to the strength of the 
U.S. economy and protect interests beyond those of investors.
    Over its 90-year history, the SEC has made regular 
adjustments to address issues ranging from executive 
compensation, Y2K risks, cybersecurity, environmental risk, 
human capital, political risk, and the impact of COVID-19. In 
addition to quantitative disclosures, the rules focus on 
providing management's perspective on a company and its 
material risks. As part of this longstanding framework, the 
rule focuses on material climate-related risks and the impact 
of those risks on operations.
    My written testimony offers specific examples of how this 
information helps investors. Investors also use this 
information to evaluate management quality. It is a red flag if 
management is not monitoring risks that are likely to 
financially impact financial conditions. Voluntary disclosures 
are not the answer. They are often inconsistent, incomplete, 
inaccurate, and unreliable. In response, the rule increases 
standardization and comparability of key climate-related 
disclosures, reduces search costs, and it increases reliability 
by bringing these disclosures within the securities reporting 
process.
    Criticisms that the SEC's rule exceeds its authority by 
requiring disclosure of nonmaterial information are not well-
founded. First, the rule limits required disclosures to 
information that is material to investors.
    Second, the SEC's authority has never been limited to 
requiring disclosures that are individually financially 
material, and there are many historical examples to the 
contrary. Simply put, the SEC acted squarely within its 
wheelhouse. This rule is the product of careful study, 
including analysis of thousands of public comments and the 
application of the SEC's technical expertise to the complex 
issue of capital market disclosure.
    Within that context, the rule is incredibly modest. It is a 
disclosure rule only. It mandates no change in business 
operations. It focuses on a small subset of the sustainability 
considerations that market participants identified as most 
important. It requires very limited and, in some cases, no 
disclosure of greenhouse gas emissions, although investor 
demand for them is overwhelmingly high. For example, the rule 
does not require any disclosure of Scope 3 emissions even when 
those emissions are material. The rule prioritizes disclosures 
where the potential for greenwashing is high, such as targets 
and transition plans. A review of the comment file provides 
ample basis for the SEC to have gone much further.
    The SEC has also adopted a variety of measures that reduce 
compliance costs, materiality qualifiers, limiting the required 
disclosure of greenhouse gas emissions, extended timelines for 
implementation, and safe harbors for liability. My written 
testimony has more on the tradeoffs the Commission made, and I 
am happy to address them in Q&A.
    Significantly, the SEC did not adopt this rule in a vacuum. 
The disclosure standards adopted by the EU, California, and the 
International Sustainability Standards Board (ISSB) will 
require many large U.S. issuers to meet more-demanding 
standards than those in this rule. This suggests the SEC could 
have been more ambitious in its disclosure mandate or sought to 
reduce the impact of multiple and potentially-conflicting 
disclosure requirements. In the absence of any SEC reporting 
requirement or if the SEC rule is curtailed, it is likely that 
those alternative systems will set a different and higher 
baseline for climate-related disclosures.
    Thank you, Chairman McHenry, and Ranking Member Waters, for 
inviting me to participate in today's hearing, and I welcome 
your questions.
    [The prepared statement of Professor Fisch can be found on 
page 68 of the appendix.]
    Chairman McHenry. Thank you all for your testimony. I very 
much appreciate it, and the committee appreciates it. I will 
now recognize myself for 5 minutes for questions.
    Mr. Wright, you are in a unique position, I think, to 
answer these questions. You comply with environmental law 
wherever you are doing projects. Is that correct?
    Mr. Wright. Absolutely.
    Chairman McHenry. And at the corporate level, you comply 
with the environmental laws of the United States?
    Mr. Wright. One hundred percent.
    Chairman McHenry. Okay. You also follow the securities 
laws. Is that correct?
    Mr. Wright. Yes, we do.
    Chairman McHenry. Okay. So, you know the distinction 
between your obligations in the securities marketplace to your 
investors, to your owners, to your shareholders, and to your 
board of directors. You also know the obligations under law to 
the environmental impacts of any actions you take wherever you 
are doing projects. So, what is the distinction here? When we 
have a securities regulator acting as an environmental 
regulator, what level of complexity does that add to projects 
to bring down the cost of energy, make it more available to the 
American people, to the world? How does that impact your 
investors? Walk us through the distinction between the 
environmental rules versus the securities rules.
    Mr. Wright. Yes. Of course, they are quite different and 
different people are involved with them. Obviously, it is our 
accounting and legal departments that do our SEC compliance or 
whatever. I am quite proud of the role our team plays in that. 
Environmental rules are very local as well. We operate a lot in 
Colorado, with the tightest regulations on, of course, not just 
greenhouse gas emissions, but on pollutants and noise and dust 
and all sorts of environmental regulations. We have a technical 
team that deals with Colorado about how to optimize, even 
helping them to understand what are the generators of 
pollutants, and how can we do this together better.
    But for the SEC to get into the very complex area of 
greenhouse gas emissions, to me, the thing right up front is 
they are going to get it wrong. It is very hard. It is easy to 
track dollars and cents precisely. They come into an account, 
and they leave an account. Greenhouse gas emissions are quite 
complex. It is not just what engine is burning what fuel. It is 
what is the temperature, what is the fuel mix, how good is the 
combustion, how is the engine tuned. You can't specifically and 
directly measure greenhouse gas emissions. It is all about 
guesstimates, and if we were told to take guesstimates----
    Chairman McHenry. With your securities filings, are 
guesstimates okay with your accountants and lawyers?
    Mr. Wright. They are not.
    Chairman McHenry. And post-Sarbanes-Oxley, there are 
consequences when you are guesstimating in a corporate 
environment?
    Mr. Wright. I sign my name every quarter that----
    Chairman McHenry. Okay. So, you are going to sign your name 
on a set of disclosures, that you have just said as an expert 
in this field, in this energy production field, in this 
specific field that is going to be very impacted by the set of 
rules, that the best estimate you have in a business that has 
dollars and cents attached to investments, the best estimates 
we get in greenhouse gas emissions are guesstimates.
    Mr. Wright. They are guesstimates.
    Chairman McHenry. And you are going to have to certify 
under the same penalties that apply to your corporate 
disclosures, whether or not you are rigging accounting, the 
same standards on guesstimates. Okay.
    Mr. Wright. That is my biggest concern. It will invite 
litigation, an effort that won't go towards reducing greenhouse 
gas emissions or improving our business or our operations or 
any of those things.
    Chairman McHenry. Okay. You will be----
    Mr. Wright. It will be, how do we minimize our litigation 
risk?
    Chairman McHenry. The Securities and Exchange Commission 
has justified the climate rule by saying that investors, 
``want,'' and ``need,'' the type of information required by 
this rule. You talk to your investors regularly, at least 
quarterly, right?
    Mr. Wright. Absolutely.
    Chairman McHenry. You spend a lot of time with activists in 
this space. Are they asking for this type of disclosure? Do 
they want this type of disclosure?
    Mr. Wright. I have never heard a request for anything 
remotely like what is in the SEC rules. But yes, we do engage 
in dialogues with our customers about greenhouse gas emissions, 
what we are doing, the trends in those technologies that can 
improve them, absolutely.
    Chairman McHenry. And materiality, right? You are in a 
business that is dealing with carbon, and disclosures around 
carbon and carbon emissions are material to your business you 
already disclosed. Is that correct?
    Mr. Wright. We do.
    Chairman McHenry. Yes.
    Mr. Wright. We do.
    Chairman McHenry. Okay. Mr. Roisman, let's talk about 
materiality, which is a basic underpinning of securities law. 
If you just would give me a little color there, as my time is 
about to run out.
    Mr. Roisman. With materiality, most people think of the 
Supreme Court cases, Basic v. Levinson, and TSC Industries v. 
Northway. And it has always been this concept that there is a 
substantial likelihood that the information is material if a 
reasonable investor would consider it important in making an 
investing or a voting decision, or such a reasonable investor 
would find the omission of that disclosure to substantially or 
significantly alter the total mix of information. It is a 
longhand way of saying, is this information important for 
investors from the eyes of a company about what will be 
impactful to that company?
    Chairman McHenry. And this climate rule is different than 
this question of materiality that has been longstanding?
    Mr. Roisman. The level of prescriptive disclosure makes 
this unlike any rule of which I am aware.
    Chairman McHenry. Okay. We will now recognize the ranking 
member of our Capital Markets Subcommittee, Mr. Sherman, for 5 
minutes.
    Mr. Sherman. Thank you. It is long past time that companies 
report how resilient they are, and hopefully move to become 
more resilient, and it is long past time that companies report 
what effect they have on our climate, and hopefully, society 
will insist that they try to reduce that effect. Mr. White 
points out that all the burdens of these regulations are 
falling on publicly-traded companies, and I agree with him. And 
I hope this committee will consider legislation so that 
multibillion-dollar private companies will also make these same 
disclosures, because they have the same effect on our climate, 
and because the stakeholders in a company are not just the 
shareholders who might be private, but the public as well.
    There have been comments on the cost of these disclosures. 
I will point out that many of these companies have to do 
reporting anyway because of the European Union or because of a 
number of States, including my own progressive State of 
California, so this may not add much to their costs at all. I 
am hoping that as we move forward, the States, the SEC, and the 
European Union will do even more to harmonize their 
regulations.
    Mr. White points out that stock prices don't change often 
as a result of revealing this information. First, one would 
expect the stock price to change only when the information that 
is revealed is different from market expectations. If a company 
comes in with earnings per share exactly what the market 
expects, the price of the stock doesn't change. Also, we may 
see no change in the price because some choose to sell because 
they are green investors, and others choose to buy because they 
are anti-green investors who think that, well, the green 
investors have sold. I have a chance to pick up a bargain.
    So even if the price doesn't change, the makeup of the 
shareholders change, and green and anti-green shareholders have 
a right to the information they need. Mr. Wright says that 
climate change is not a problem for the operations of his 
natural gas company. I will simply point out that a report on 
the 215 largest public companies indicates that they will incur 
over a trillion dollars of losses over the next 5 years as a 
result of climate change. Whether his particular company is 
affected, I will leave to him.
    I think the SEC has done a good job on climate. We now have 
to move toward other necessary disclosures. I have been an 
advocate here of looking at workforce disclosures and 
disclosures about one's exposure to China, because an invasion 
of Taiwan is certainly a possibility, and the economic effects 
of that would be enormous and shareholders ought to know, so I 
want to focus on workforce. Over 100 years ago, the price of 
the stock was very close to the balance sheet. Today, 90 
percent of the value has nothing to do with what is on the 
balance sheet. The most valuable asset isn't on the balance 
sheet; it is the company's workforce.
    Professor Fisch, should we require companies to report 
information about their workforce? Among this would be turnover 
rates, employee training expenses, diversity, equity, and 
inclusion efforts, and how diverse their upper management is; 
is that a good project for the SEC?
    Ms. Fisch. Mr. Sherman, absolutely. When I said that this 
was sort of a small step in terms of sustainability disclosure, 
investors have been asking the SEC for dozens of years not just 
for modest climate-related disclosures, but disclosures with 
respect to the range of new and challenging issues that go to a 
company's resilience, and human capital management is right up 
there at the center of those issues. Human capital management 
raises new challenges for companies, both because an increasing 
percentage of their assets are their workforce and because 
there are evolving issues: worker safety, worker turnover, 
sexual harassment. All of those things are critical in 
understanding a company's business plan, its strategic vision, 
and the quality of its management.
    Mr. Sherman. In addition, the other asset that isn't on the 
balance sheet is research and development (R&D), and I have 
urged on many occasions and often with the Financial Accounting 
Standards Board (FASB) that R&D expenses be capitalized. And 
finally, we now have bipartisan legislation to require 
companies to describe their China risk because that will give 
them some incentive to try to derisk. And to the extent they 
were derisked, that creates a greater likelihood that China 
will not invade Taiwan, because we will be able to stand up to 
them if they do. I yield back.
    Chairman McHenry. We will now recognize the Vice Chair of 
the committee, Mr. Hill, for 5 minutes.
    Mr. Hill. Thank you, Mr. Chairman. I want to thank you, and 
the Chair of our Subcommittee on Capital Markets, Ann Wagner, 
and Representative Bill Huizenga of Michigan, for your good 
work on guiding the response to the SEC agenda on 
environmental, social, and governance (ESG), particularly on, 
``E,'' during this Congress.
    Mr. Stebbins, it is good to see you. It's good to have you 
back at the committee. When you were General Counsel of the 
SEC, I think you were involved in some 80 different rulemakings 
during your time as General Counsel. Were you accused by the 
Federal courts of being arbitrary and capricious when you were 
the General Counsel?
    Mr. Stebbins. I don't remember if we were or not, and the 
SEC certainly gets sued on every major rulemaking. It just 
happens. The Gensler administration has had a number of major 
rulemakings, but I don't recall, sir, everywhere, but I think 
our record was pretty good on rulemaking.
    Mr. Hill. And did you ever have a Federal court suggest 
that you had to pay the plaintiff's legal expenses due to a 
poor ruling by the SEC?
    Mr. Stebbins. I don't recall that.
    Mr. Hill. I think we have seen that in this Administration, 
under Chairman Gensler, and we have seen bipartisan response 
here on this committee that Chairman Gensler has moved some 60 
rulemakings, and in your testimony, you outline just a 
tremendous number of challenges with them. I thought it would 
be useful to ask you some questions about the Administrative 
Procedure Act (APA), and how do we get a better process here in 
the Financial Services Committee of overseeing the SEC on that? 
The final climate rule dramatically differs from the proposal. 
They got 97,000 comments or something like that. By removing 
mandatory Scope 3 emissions and adding new requirements, is 
this something that, if you would have been General Counsel, 
you would have recommended?
    Mr. Stebbins. I think I would have recommended that they 
send it back out for comment. Logical outgrowth is the theory 
they would be relying on. I just think it was substantially 
changed with the removal of most of the Scope 3 requirements as 
well as the 1-percent financial statement test, I think, to the 
better. But I think in many ways, it is a large release. It is 
a 900-page adopting release, and the comments were obviously 
extensive, but a lot of people were focusing on those two 
topics, maybe to the exclusion of other topics. And when those 
two topics were out of there, I think the focus was going to 
perhaps go more to the other topics. I would have re-proposed 
it. I don't know if that is going to be fatal to the SEC in 
their court case, but I would have recommended it, yes.
    Mr. Hill. And I misspoke. It is not 97,000 comments; it is 
only 24,000 comments, so I want to let the record be 
straightened out there. In your testimony on share repurchase 
rules, the Fifth Circuit again said the SEC acted arbitrarily 
and capriciously and said they failed to conduct a proper cost-
benefit analysis. The SEC is required to do a cost-benefit 
analysis for rules they propose, isn't that right, Mr. 
Stebbins?
    Mr. Stebbins. That is correct. It was a Fifth Circuit 
decision vacating the share repurchase rules and vacating them 
on two grounds: number one, failure to conduct a proper 
economic analysis/cost-benefit analysis; and number two, 
failure to show a genuine problem existed. They went back to 
the staff and asked them to show the problem, and they weren't 
able to do it, or at least they said they weren't going to be 
able to do it, so the Court vacated the rule. So, those will be 
the challenges they will face again, the same arguments in this 
litigation.
    Mr. Hill. To me, it seems like the problem is that we don't 
have a high-quality standard at the Commission for conducting a 
cost-benefit analysis. In your testimony, you talked about it, 
Chairman McHenry mentioned it, and 79 percent of respondents 
asserted that the SEC underestimates the cost of compliance 
with all of its proposed rules. And in this particular rule, 
the range was from $197,000 to $739,000 for annual compliance 
costs, in Mr. Wright's point of view. What do we need to do as 
Congress to make sure and hold the SEC to a high standard, that 
there is a methodology that is defensible, whether you are at 
Penn or at Vanderbilt, anchor down, to have a decent cost-
benefit analysis?
    Mr. Stebbins. I think Professor White is probably in a 
better position than I am to talk about the cost aspects. I 
thought the cost numbers were likely going to end up too low 
based on that. Law firms are now billion-dollar entities. The 
going rate in New York City is over $2,000 an hour, so I am 
guessing they are going to end up too low on these estimates, 
given the complexity of the rule, but it remains to be seen.
    Mr. Hill. I yield back, Mr. Chairman.
    Chairman McHenry. We will now recognize the gentleman from 
Georgia, Mr. Scott, for 5 minutes.
    Mr. Scott. Thank you very much. Professor Fisch, you are a 
great professor at the great University of Pennsylvania, and I 
am a graduate of the Wharton School at the University of 
Pennsylvania. And I want to give you a very gracious welcome to 
our committee, and please give my regards to the Wharton 
School. That great professor, George W. Taylor, was a good 
friend to me, and please tell my friends at the Wharton School, 
hello, and please keep doing your good work.
    Professor Fisch, the SEC's climate risk disclosure rule 
encompasses a strong set of standards that meet investors' 
demands for mandatory corporate transparency as well as 
companies' need for clarity. Is that right?
    Ms. Fisch. Yes, sir, and thank you for your kind words 
about the Wharton School. That is exactly right, and what I 
think distinguishes this rule from so many others is just the 
overwhelming investor demand for this information and 
investors' insistence that despite everything that the SEC has 
done to encourage climate-related disclosure, investors are not 
getting the information they need.
    Mr. Scott. Let me ask you this also, Professor Fisch. Do 
you believe that many of the registrants who would be impacted 
can and should be prepared to make these disclosures before the 
final rule requires them to do so?
    Ms. Fisch. That is a great question. And that is one of the 
reasons that it is so tricky to do a cost-benefit analysis in 
this system, because you have so many things going on. Just in 
the 2 years between the original rule proposal and the SEC's 
adoption of the final rule, the technology in this area has 
improved by leaps and bounds. Many more companies are 
disclosing this information voluntarily, and as I elaborate on 
in my written remarks, there are other regulators who are going 
to demand this information regardless of what the SEC does.
    Mr. Scott. Would you agree that this is an aggressive 
enough timeline now?
    Ms. Fisch. I think it is a very generous timeline. I think 
that you also have to keep in mind the fact that regardless of 
whether there is a mandate, many companies are disclosing some 
or all of this information voluntarily, and every year 
increasing their voluntary disclosure in response to investor 
demands. At the same time, because there isn't a uniform 
baseline, that information is located in multiple places. It is 
hard to compare. It is not standardized.
    Mr. Scott. Does the timeline that the SEC adopted generally 
align with many U.S. companies' compliance dates for the EU's 
corporate sustainability reporting directives and the 
California laws?
    Ms. Fisch. Both of those standards are still evolving, but 
I would say at least in some cases, the SEC's timelines are 
more generous than those other regulators.
    Mr. Scott. And I want you to know, Professor Fisch, that I 
am also appreciative that the SEC chose not to take any actions 
that could lead intentionally or unintentionally to burdensome 
reporting requirements for production agriculture. You see, I 
am also the ranking member of the House Agriculture Committee. 
My question is, would it be burdensome reporting requirements 
for production agriculture when their goods are part of the 
supply chain for a publicly-related company?
    Ms. Fisch. You are absolutely right. The SEC, I think, was 
very careful in the scope of what it mandated, but again, 
companies that aren't subjected to the mandate still have to 
report to the extent that they are dealing with customers, 
suppliers, and third parties who are demanding that 
information. And in many cases, large companies with climate-
responsible policies are asking for that information from their 
counterparties.
    Mr. Scott. Thank you very much, and please keep up the good 
work.
    Chairman McHenry. We will now recognize the gentleman from 
Oklahoma, Mr. Lucas, who is also the Chair of the House Science 
Committee.
    Mr. Lucas. Thank you, Mr. Chairman, and while it will be a 
great day when that happens, I would note to my colleague, the 
ranking member, that we are not quite there yet, David, and we 
also have a slightly different definition of how agriculture is 
impacted by these SEC issues.
    Mr. Scott. Well, once a chairman, you are always a 
chairman, and you are the same chairman.
    Mr. Lucas. You are obviously a great ranking member. Thank 
you, Mr. Chairman.
    That said, since the Biden Administration could not 
successfully implement its climate agenda through Congress when 
they controlled both Houses, of course, and the White House, it 
has turned to the agencies to implement climate policy 
unilaterally. At the SEC, the climate rule aims to implement 
climate policy under the guise of security regulation.
    Mr. Wright, you discussed in your testimony, and with 
Chairman McHenry, how your company has been impacted by this 
SEC rule. Could you expand on that, on how this rule goes 
beyond the purpose of securities regulation?
    Mr. Wright. Yes, absolutely. Again, securities regulation 
is essential, and the SEC has done a great job. My beef is not 
with the SEC, but, yes, this is going into a complex topic of 
climate change, for which we don't get specific numbers like we 
do for financial accounting. My other, maybe philosophical 
problem with it is, what is the net impact going to be? We are 
going to get sued more. It is going to be harder to do business 
in this industry.
    We backed a very small company, Nomad, which had a 
technology to produce sand instead of at a mine, and you get a 
truck at 60 miles, a mine right near the well so that we could 
reduce driving truck traffic, not drive the sand. Of course, 
our industry is striving to do things better. But now, that 
little private company, a couple of scrappy entrepreneurs--
since we are their dominant investor, we have some control over 
them--is going to have to figure out how they are going to 
count their greenhouse gas emissions instead of running their 
small business so that we can report them up the chain.
    I view it as cumbersome, clunky, and not really a climate 
policy. How are we going to drive innovation and improve 
greenhouse gas emissions by making best guesstimates on 
subjective numbers as opposed to talking about technologies and 
big pictures and real progress?
    Mr. Lucas. Clearly, no industry is insulated from this, and 
the energy sector is seriously harmed, and manufacturers of all 
sizes will be impacted, and I think, very clearly, the climate 
rule hit farmers and ranchers, too. Some supporters of the 
final rule have praised the complete removal of the disclosure 
requirements for Scope 3 greenhouse gas emissions. 
Unfortunately, I think this is a mischaracterization of the 
rule. While the rule scales back the explicit disclosure 
requirements for Scope 3 emissions, many public companies must 
still collect emissions data from their supply chains to comply 
with this rule.
    Mr. Roisman, could you discuss how public companies in many 
instances will still need to collect this greenhouse gas 
information, this data?
    Mr. Roisman. I will say this. I think many companies are 
relieved that they will not have to do explicit line-item Scope 
3 disclosure. However, there are interpretive questions today 
about what companies may have to do. And one such example is if 
a company decides that they have a material climate-related 
target or goal, something that could be net zero or a reduction 
in Scope 3 emissions, they are required to provide investors 
with enough information to understand the progress they have 
made. And if you are required to talk about progress, you are 
going to have to talk about Scope 3, and how you have done 
every year.
    So, I think there is a concern that even though there is no 
line-item disclosure, you are still going to qualitatively at 
least have to talk about how you are meeting those goals and 
the progress you made, and this is an issue that is unclear in 
the rule. People are scouring footnotes, and looking at 
statements. And if the SEC wants to clarify that you won't have 
to do any Scope 3 emissions disclosure, I am hopeful that they 
are going to do that soon.
    Mr. Lucas. Mr. Stebbins, could you offer your expertise on 
this?
    Mr. Stebbins. I am a securities lawyer. I would tell 
people, if they are setting goals or have set goals, they are 
going to need to do Scope 3 work in order to do the analysis to 
give people an update based on what I read in the release. And 
also, I would say that, as it says, you only have to put Scope 
1 and 2, and if material, the only way to judge materiality is 
to do the work. Even if you are not reporting it, you are still 
going to have to do the work determining 1 and 2. But I think 3 
is in there, the way I read the rule, and there is also 
something in there about reaching out to your suppliers and 
determining the effects and your customers and suppliers based 
on climate risks to your business. So to say that the food 
chain up and down your value chain of customers and suppliers 
isn't going to be affected by this, I think is an 
overstatement.
    Chairman McHenry. The gentleman's time has expired.
    Mr. Lucas. I yield back, Mr. Chairman.
    Chairman McHenry. The gentleman from Massachusetts, Mr. 
Lynch, is recognized for 5 minutes.
    Mr. Lynch. Thank you, Mr. Chairman. Professor Fisch, the 
traditional role of the SEC and a central tenet of our 
securities laws aims to protect investors. And because of the 
asymmetry of information that exists where companies have all 
the information and an innocent investor may have very little, 
there is a need for disclosures, and that is sort of a 
framework that encapsulates the relationship between the SEC 
and these companies wishing to sell securities and investors. 
Is that a fair statement?
    Ms. Fisch. Yes, sir.
    Mr. Lynch. Okay. So as part of that investment decision, an 
investor needs to know the risks, correct?
    Ms. Fisch. Absolutely.
    Mr. Lynch. And from what we see in the world around us, 
climate change is a tangible risk. It is ongoing. It may affect 
some companies greater than others, but the bottom line here is 
that an investor is entitled to that information, and that has 
long been the practice. That is not a departure from the SEC's 
mission; that is a founding principle within the SEC. Is that 
correct?
    Ms. Fisch. Yes, that has been true since the 1930s. The 
SEC's disclosure mandate is to ensure that investors get all 
the information they need, and that includes information about 
material risks and how management is identifying and responding 
to those risks.
    Mr. Lynch. And a consequence of the lack of disclosure, 
especially in today's world, I think is described well by the 
folks over at Better Markets. They wrote, ``The failure to 
disclose risks, regardless of the source, prevents investors 
from properly evaluating companies, causes those companies and 
markets to be mispriced, and distorts capital formation and 
allocation, which eventually harms the economy, jobs, and 
growth.'' Do you agree with that statement?
    Ms. Fisch. Yes, I do.
    Mr. Lynch. So, the rule itself just requires disclosure. It 
doesn't require any action. Is that a fair statement?
    Ms. Fisch. Yes, that is a fair statement.
    Mr. Lynch. And what advantages do you see, not only in the 
climate context, but generally, for the strength of our 
markets? The SEC was established in response to the collapse of 
our markets in the 1920s, and it restabilized the markets 
themselves and induced consumer confidence to the point where 
we are the envy of the world in our markets. We have deep and 
strong markets, where investors feel like they are protected. 
By limiting disclosures to investors, would this harm the 
integrity of our markets?
    Ms. Fisch. I don't believe the rule limits disclosures to 
investors.
    Mr. Lynch. No, no, no, no, no. It is just the opposite.
    Ms. Fisch. Right.
    Mr. Lynch. It is the opposite.
    Ms. Fisch. I believe what the rule does is respond to a 
very real and very longstanding investor demand, and I think 
that is entirely consistent with protecting the integrity of 
our markets, the reputation of our markets. And I would say 
that reputation doesn't just attract U.S. companies to list, 
but it attracts companies and investors from all over the 
world.
    Mr. Lynch. Right. One of the things I noticed the other day 
is that the cost of a kilowatt hour in Europe is about triple 
what it is in the United States, even though we have robust 
regulatory frameworks in place. And I am curious if you know of 
instances where the greater disclosure not only helps the 
investor, but it helps the integrity of the industry itself?
    Ms. Fisch. I think that is exactly right, and one of the 
advantages of broad-based disclosure is so that the market and 
investors can do comparisons, right? They are not just getting 
some selective sample of companies, but they are looking across 
an industry and able to identify, well, what is reasonable, and 
what is reasonable in the oil and gas industry might be quite 
different from what is reasonable in technology.
    Mr. Lynch. That is great. Mr. Chairman, my time has 
expired. I yield back.
    Chairman McHenry. The gentleman from Florida, Mr. Posey, is 
recognized for 5 minutes.
    Mr. Posey. Thank you very much, Mr. Chairman. In the words 
of a really common-sense writer by the name of Robert Ringer, I 
think this will be classified as another case of the government 
being the omnipresent defender of nonexistent problems with the 
people. Right now, at the height of inflationary concerns of my 
constituents who are paying more for everything, I am sure none 
of them are looking forward to paying more for their stocks 
because of the non-value-added costs that this proposed rule is 
going to add to it by an agency that let Robert Ringer 
literally run free after being warned numerous, numerous times. 
This guy is probably doing nothing for 10 years. Now, they are 
going to be the climate police, and I guess the next step is 
that they will criminalize any stock purchase that they don't 
think is proper in their view.
    Mr. Roisman, can a typical noninstitutional investor really 
make use of the required climate change disclosures to make 
better investment decisions? We are talking the average guy in 
the street.
    Mr. Roisman. I am afraid I haven't been at an asset 
management shop that has shown me how greenhouse gas emissions 
works into their portfolio theory.
    Mr. Posey. Mr. Wright, does this rule increase or decrease 
the chances that the United States will have a sound 
diversified energy strategy, and why?
    Mr. Wright. I think it decreases the chances. I think the 
net result is likely less production here. More production 
imported from overseas, to me, would be the expected net 
outcome of the rule.
    Mr. Posey. Okay. Clearly, in concert with the rest of this 
Administration's agenda to make America last. We have heard 
from the MAGA integrators already.
    Mr. Stebbins, does this rule meet the Supreme Court's major 
questions doctrine in terms of its foundation on congressional 
authority?
    Mr. Stebbins. I think it is going to be a difficult lift 
for the Commission in that regard. I think there is a strong 
likelihood that the Eighth Circuit and the Supreme Court will 
strike the rule down based on the major questions doctrine. The 
major questions doctrine talks about when you are outside your 
area of expertise, which is in Justice Kagan's well-written 
dissent. She talks about being outside your typical area of 
expertise. In my experience at the SEC, that is certainly the 
case here.
    And doing something of large economic and political 
significance is going to be a difficult area for the SEC as 
well, and then, you need to look to a specific congressional 
authorization if those other two criteria are met. The SEC does 
not have a specific authorization here. They have just the 
general investor protection mandate. So, those will be the 
questions that the courts will be looking at, I think, in the 
criteria.
    Mr. Posey. To add to a better than a thousand-to-one odd 
that a consumer is hauled into court for violation of a Federal 
law made by some unaccountable, unrecallable, bureaucrat, not 
by people that they elected to make their laws like they think.
    Mr. Roisman, do you really believe this rule will have any 
effect on the world climate as their proponents hope it will?
    Mr. Roisman. I think that Mr. Wright is a better judge of 
that, sir. I am not a climate scientist.
    Mr. Posey. Mr. Stebbins, to disclose things like climate-
related goals, climate transition plans, climate scenario 
analysis, and internal carbon pricing really become a mandate 
to have such things because companies will be afraid not to 
have them.
    Mr. Stebbins. I think the way this is going to be judged is 
there is already, as I think most of you know, a requirement to 
disclose all material, economic, or all material risk, which 
includes environmental risks that are already out there. So if 
you are requiring other information to be disclosed that might 
be viewed as nonmaterial, then you are looking at a cost-
benefit analysis, right? And then, you are trying to determine 
what is the cost of this disclosure and what is the benefit of 
the disclosure, and that is going to be the area where all of 
these requirements will be judged. If there were two or three, 
I think it is an easier case than when there are 30. So, that 
is how I would put it.
    Mr. Posey. Thank you. My time has expired. I yield back.
    Mrs. Wagner. [presiding]. The Chair now recognizes the 
gentleman from Texas, Mr. Green, for 5 minutes.
    Mr. Green. Thank you, Madam Chairwoman. I thank the ranking 
member, I thank the witnesses for appearing, and I especially 
thank you, Ms. Fisch, for being here today. You have brought 
some degree of balance to the panel. I especially appreciate 
the fact that the Democratic staff invited you to come to give 
some degree of balance to the panel. And without going into any 
specificities, are you familiar with the entities that these 
four White men work for?
    Ms. Fisch. Yes, I am.
    Mr. Green. Are there smart women working for these 
entities?
    Ms. Fisch. I believe there are, yes.
    Mr. Green. Are there women working for these entities who 
could testify about the issues before us today?
    Ms. Fisch. I couldn't answer that question, sir.
    Mr. Green. I see, but you believe they are smart.
    Ms. Fisch. I do.
    Mr. Green. Okay. Thank you very much. Let's go on with the 
traditional questioning. I have a question for you, but within 
the question, I have a question. So I will read the question, 
and then I will go to the question within the question, and I 
thank the staff for assisting. The question is, can you explain 
how these rules will help to protect retail investors who might 
otherwise struggle to obtain or interpret climate-related risk 
information about their investments? That is the question. But 
the question within the question is, define, if you would, 
please, what a retail investor is, for the public?
    Ms. Fisch. Thank you. Retail investors are regular people 
like us as opposed to institutional investors, mutual funds, 
pension funds, and so forth, and most retail investors invest 
through intermediaries. Many of us have stock in mutual funds, 
in our retirement plans, right? The way this rule helps is the 
people who run those retirement plans have come to the SEC for 
years, and they have said, we need this information, and we 
need this information for several reasons. One, it helps us 
understand the financial value, the economic value, the 
sustainability of these companies in which we are investing our 
customers' retirement savings, right? And we have a fiduciary 
duty to collect and evaluate all material information. We need 
it. We are not getting it.
    But there is a little bit more. Retail investors have a 
variety of investment preferences. Some of them want to invest 
in carbon zero funds. Some of them want to invest in the 
Catholic values fund. So institutional investors have an 
obligation, as part of this robust capital market, to satisfy 
those different investor preferences, but you can't construct a 
fund that meets those preferences without having access to the 
underlying information.
    Mr. Green. And is it true that the larger investors, some 
of them have persons available to them to do research to help 
them to acquire the intelligence that you have referenced? Is 
this a fair statement?
    Ms. Fisch. It is a fair statement. But one of the, I think, 
repeated statements in the SEC's comment record is that even 
the largest investors are spending hundreds of thousands, in 
some cases, millions of dollars, trying to obtain this 
information. They are paying third-party providers, they are 
asking companies to fill out extensive questionnaires because 
they are not getting this information in securities disclosure.
    Mr. Green. And the retail investors, people like you and me 
and other persons who are investing in retirement accounts, 
don't have the wealth to acquire this level of intelligence, do 
they?
    Ms. Fisch. That is absolutely right. Mandatory disclosure, 
as you say, creates a level playing field for all investors.
    Mr. Green. And as we are going about doing this--making 
sure that we level the playing field is the way I see it, so 
that the retail investors, the people who just don't have the 
millions, can make proper investments. As we go about doing 
this, is there a way to do it other than to require some 
disclosure and try to make it uniform?
    Ms. Fisch. Congress decided in the 1933 Act and the 1934 
Act that mandatory disclosure was the best, the most-efficient 
system for getting that information to all investors.
    Mr. Green. I want you to know I stand with these retail 
investors. I stand with the average person who is trying to 
make an investment, and I want the playing field leveled for 
that average person. Right now, they are at a disadvantage. 
This rule can help us to give them the same opportunities to 
invest as other investors.
    Thank you, Madam Chairwoman. I yield back.
    Mrs. Wagner. The gentleman yields back. The Chair now 
recognizes the gentleman from Michigan, Mr. Huizenga, who is 
also the Chair of our Oversight and Investigations 
Subcommittee, and also heads up our Climate Change Commission, 
Mr. Huizenga, for 5 minutes.
    Mr. Huizenga. Thank you, Madam Chairwoman. Like Chairman 
McHenry highlighted, the SEC's climate rule has deviated from 
the materiality standard, which will leave investors to be, 
``second-guessed,'' by the SEC. Materiality qualifiers also 
ensure that companies must disclose climate-related items that 
the SEC staff has considered important, not investors.
     Mr. Roisman, can you explain how special interest groups 
can take advantage of disclosures borne out by rules such as 
this? Earlier, we heard from one of my colleagues' statements 
that well-funded special interests are suing the SEC. I am 
sure, Mr. Stebbins, you never saw a well-funded special 
interest sue the SEC while you were General Counsel, but, Mr. 
Roisman, how can these well-funded, special, left-leaning 
interest groups sue the SEC to take advantage?
    Mr. Roisman. For better or worse, anyone can really sue the 
SEC, as we have seen. What I do think----
    Mr. Huizenga. We will get to Mr. Wright shortly.
    Mr. Roisman. I think one of the concerns people are raising 
about this rule, and it is echoed in the statements of SEC 
Commissioner Uyeda, is that by creating sort of a special set 
of rules relating to climate, you are making it stand apart. 
And historically, what the rule has been is companies need to 
provide information that is material to investors, and it is up 
to companies to do that because they are, frankly, in the best 
place to do it.
    Mr. Huizenga. Okay. I wish some of my colleagues on the 
other side would think as highly about a female and a minority 
voice on the SEC opposing this as well. It seems to me that you 
have been lumped in a group as well.
    Mr. Wright, are you a well-funded special interest?
    Mr. Wright. I am not.
    Mr. Huizenga. Okay. I didn't think so. It sounds like you 
are a business person. As you know, many companies have been 
unwilling to stick their neck out like that. Why have you 
decided to do so?
    Mr. Wright. I think the issue is just simply too important. 
We get trade groups. Everybody is going to sue on it, but we 
are very passionate about this topic. And it impacts not just 
our company, but our entire industry, and ultimately, I think 
it impacts the United States' energy system, and being by far 
the largest producer of energy in the world, that affects the 
world energy system. So, I am very passionate about having 
thoughtful, open dialogue in evaluating tradeoffs and how to 
make those inevitable tradeoffs between the energy system and 
climate change. But a bureaucratic reporting rule that will 
lead companies to, in reality, get sued, I don't see that 
constructiveness in that.
    Mr. Huizenga. Materiality sounds like a pretty good 
watchword.
    Mr. Stebbins, someone was asking you, and you were kind of 
getting cut off on the time, I think it was Mr. Posey--
supposedly Scope 3 was, ``pulled out,'' but we are hearing that 
there are going to be some real ramifications, and it may not 
actually have the same effect.
    Mr. Stebbins. The statistics show that a lot of companies 
do set goals in this area, and to the extent you have set 
goals, I think Scope 3 is going to be implicated based on the 
adopting release. And I think also, it talks about transition 
plans, which are defined very broadly to mean plans that a 
company is using to reduce its environmental risks, and in 
connection with those plans, if you have such, and most 
companies will, Scope 3 again comes into play. So, I think it 
is an overstatement to say it is totally out of the release. 
Has that lessened? Yes, it has lessened.
    Mr. Huizenga. Okay. Has the SEC stated its own rules 
previously?
    Mr. Stebbins. It has happened before. It happened in the 
D.C. Circuit when I was there.
    Mr. Huizenga. I have to move quickly here. And then, when 
there are major issues, court cases, legal challenges, et 
cetera, with a rule, and the SEC would voluntarily stay its own 
rule, would it add an implementation time cushion on the tail 
end of that?
    Mr. Roisman, feel free to weigh in on that as well. 
Basically, would you grant an additional year before you are 
doing any kind of implementation?
    Mr. Stebbins. I think practitioners will expect the SEC, 
depending on how long the litigation goes, to adjust the 
timeframes. I think that is next.
    Mr. Huizenga. So that is reasonable, Mr. Roisman?
    Mr. Roisman. I think it is more than reasonable. I would 
certainly hope.
    Mr. Huizenga. It should be expected?
    Mr. Roisman. I hope, yes.
    Mr. Huizenga. Would it be helpful if the SEC actually 
weighed in right now and said, we are going to give it one 
year?
    Mr. Roisman. Very much so.
    Mr. Huizenga. Okay. That is something I intend to pursue 
with them.
    Mr. Stebbins, I only have a few seconds, but you had hit on 
the APA as well, and I am sorry, Mr. White, I can't get to my 
question for you. I am going to be doing a follow-up on that. 
But it seems to me that the economic analysis to adequately 
consider the impacts of the rule wasn't done, so we will follow 
up with you on that. I yield back.
    Mrs. Wagner. The gentleman yields back. The Chair now 
recognizes the ranking member of the committee, the gentlewoman 
from California, Ms. Waters, for 5 minutes.
    Ms. Waters. Thank you. Professor Fisch, although I welcome 
the SEC's latest step in creating a standardized climate 
disclosure framework, I was nonetheless disappointed that the 
SEC's final rule fell short of the original proposal. In 
particular, the rule exempts Big Banks and insurance companies 
from disclosing their greenhouse gas emissions, even though it 
is known as Scope 3 emissions and gives license to companies to 
avoid disclosing any of their greenhouse gas emissions if they 
decide it is not material. The final rule also lessened 
requirements that companies disclose the potential impacts of 
transition risks. Do you agree these are areas where the SEC 
can improve the efficacy of its rules in the future?
    Ms. Fisch. Yes, I do, and, in particular, I wanted to focus 
on transition risks, targets, and announced goals, because the 
issue has come up in several questions. Aren't companies 
inadvertently going to have to disclose Scope 3 emissions as 
part of that? And I just want to flag that one of the areas 
that is most ripe for greenwashing is the announcement of 
targets and transition plans without any underlying 
information. That is not just greenwashing; that is outright 
fraud. And to the extent that a company makes those statements 
and, therefore, puts itself on the hook under the existing 
rules to say, well, yes, we are actually monitoring the things, 
our goals that we have announced that this is the progress that 
we are making, these are the steps that we are taking, I think 
that is exactly the information investors need to distinguish 
true and meaningful disclosures from fraud.
    Ms. Waters. Thank you. As you mentioned in your testimony, 
the final rule also limits the attestation requirements for 
Scopes 1 and 2 emissions, and, in some cases, shields 
attestation providers from liability. Can you share your 
thoughts on why this information is important to investors?
    Ms. Fisch. Auditing, attestation, all of that increases the 
reliability of information, and auditing has been part of 
financial statement disclosure for a long time. Issuers are 
voluntarily, in many cases, providing that same measure of 
reliability to their greenhouse gas emissions disclosures and 
to their other climate-related disclosures. And what the SEC is 
saying is, look, this is something that adds a tremendous 
amount to the reliability of this information. This is 
something that we should facilitate.
    At the same time, auditing services are viewed as costly, 
particularly for smaller firms, so what the SEC has implemented 
is a graduated level of disclosure with different timelines and 
different levels of assurance, depending on the size of the 
company. So it is very responsive, I think, to both investor 
and issuer needs.
    Ms. Waters. I want to thank you very much, and I yield back 
the balance of my time.
    Mrs. Wagner. The gentlewoman yields back. The Chair now 
recognizes the gentleman from Texas, Mr. Sessions, for 5 
minutes.
    Mr. Sessions. Madam Chairwoman, thank you very much. This 
is an interesting discussion today. Mr. Wright, I am going to 
probably aim some questions directly at you. I think it is 
better to tell you ahead of time rather than repeating the 
question.
    When this 886-page rule was issued, the SEC estimated that 
the rule would increase typical costs of a public company by 21 
percent. Today, I looked at the website for the U.S. Securities 
and Exchange Commission, and their website, at the very top, 
has across it, ``Supporting small business,'' and below that, 
``We inform and protect investors. We facilitate capital 
formation. We provide data.''
    Well, they are providing data. I really wonder how this 
obvious 3-to-2 vote that took place seems like it is anti-
investor and not helpful. Talk with me about your viewpoint 
about their mission statement, which I took as a mission 
statement, and about this as it relates to the typical cost of 
being a public company increased by 21 percent.
    Mr. Wright. Yes, I think that matters a lot in this 
country, and I think you have seen the trend. There are less 
than half as many public companies today as there were a few 
decades ago. This is unfortunate because it is through these 
public companies that investors, the smallest investors, every 
investor in this country can access private companies. There 
are other vehicles. Wealthy people can invest in those deals, 
but public companies are what is on offer and what is available 
for the investors across this country. So making it harder, 
more expensive, and riskier to be a public company, yes, 
reduces investor choices and options. It means larger amounts 
of resources are spent, in this case, gathering guesstimates 
that are then assembled, my bigger worry, and then, litigation 
over the guesstimates. I don't see that as productive.
    I think the SEC plays a critical role. We need oversight, 
we need a level playing field, we need to get out fraud, we 
need to build confidence in our marketplaces, so I think the 
SEC plays a critical role. But when it strays way outside of 
its lane, I struggle to find anything positive that could come 
from that.
    Mr. Sessions. Mr. Wright, I agree with you. I spent 16 
years in a public company, and moved 8 times with them. It was 
a small company called AT&T, and our job as the management was 
to encourage not only the formation of capital, but to also 
encourage the supporting of small business. We took that as the 
way that we would grow our value, not just to the shareholder, 
but to the marketplace. Why would someone allow this to be up 
there that obviously is questionable? How would they justify 
this? I will ask anyone on the panel. Supporting small 
business, we voted for what would be, for a typical company, a 
21-percent increase in costs. Can anybody on the panel offer 
some insight into that?
    Ms. Fisch. I would just note for the Congressman that the 
rules broadly exempt smaller reporting companies and emerging 
growth companies from virtually all of the reporting 
requirements, which is consistent with the SEC's longstanding 
practice of reducing----
    Mr. Sessions. Thanks. The gentlewoman has been around long 
enough where she knows that if the big people, the big 
companies, if they suffer a 21-percent increase in cost, that 
means that it finds its way down to smaller companies. That was 
the one thing that you learned in Chamber of Commerce 101. You 
get a big company, and there are lots of small businesses that 
feed off of it. So, what I heard you say is we are only 
diminishing the value of the big companies, no process. We can 
definitely say we are for small business. I disagree. Madam 
Chairwoman, I yield back.
    Mrs. Wagner. The gentleman yields back. The Chair now 
recognizes the gentleman from Missouri, Mr. Cleaver, for 5 
minutes.
    Mr. Cleaver. Thank you, Madam Chairwoman, and I thank all 
of you for giving us your time. Mr. Wright, this is no, 
``gotcha,'' kind of question that leads to some kind of nasty 
comment from me. It is not. But I would like for you to tell me 
whether or not you believe that the SEC should still be in 
existence. Go ahead?
    Mr. Wright. Okay. I think I said in my opening statement 
that the SEC plays a critical role, and I am a strong believer 
in it. I have had only a constructive and positive working 
relationship with it for years.
    Mr. Cleaver. Okay. Yes. As you know, the SEC came into 
existence in the aftermath of the 1929 collapse, so it has been 
in existence for over 70 years, and from time to time, the 
risks have changed, but the SEC's role has remained the same. 
Do you agree with that?
    Mr. Wright. I think the implementation of that role has 
evolved as finance has evolved and as counting has evolved, and 
all of that. But to protect against fraud and make sure that 
people can trust the numbers from public companies, I think 
that mission has remained the same.
    Mr. Cleaver. Yes. Sometimes, it seems as if the opponents 
are actually beating up on the EPA as opposed to the SEC.
    Mr. Wright. Well, the EPA is an environmental regulator.
    Mr. Cleaver. Yes.
    Mr. Wright. Yes, that is the question. We have an 
environmental regulator that is also very rigorous in doing its 
job. Why do we want a financial regulator to become an 
environmental regulator?
    Mr. Cleaver. As I said earlier, the SEC's role has remained 
the same. Does this rule require companies to reduce emissions 
or make any kind of changes to address the risks identified?
    Mr. Wright. It certainly makes us change what people in our 
company do, because now we are going to have to spend a lot of 
time again gathering data that we can't gather, precisely. I 
can't emphasize that point enough. And the biggest issue for 
us, I believe, is this, ``transition risk,'' which is really 
regulatory risk from the government. So, does anyone know what 
the government is going to do in the future? I don't know how 
to speak thoughtfully or act thoughtfully on that risk.
    Mr. Cleaver. I respect the chairman's comments at the 
beginning. He said, we believe in science, and I seriously and 
honestly respect that because I think we are probably beyond 
it. But your comments that the globe is slowly warming and sea 
levels are gradually rising and have been doing that for over 
150 years, and in the second half of this same period, you say 
that since the end of World War II, human burning of fossil 
fuels has increased atmospheric CO2 concentration by 50 
percent. That's from your YouTube video, let's be honest. And 
if I listen to that, it is almost like you don't believe that 
climate change is real because you said you did, but then when 
I read this, you are essentially saying, no, it doesn't, that 
the scientists are wrong.
    Mr. Wright. Not at all. I think the video and the report 
that I am reporting the public data on temperature, on sea 
level lies on extreme weather, I am trying to put the public 
data that we understand about climate change in a more-
digestible format so people can understand it. We don't know 
the future, but people can understand at least the history of 
what is going on with climate change because you have to weigh 
the tradeoffs there, the importance of energy.
    Mr. Cleaver. Yes. My time is running out. Explain this. You 
say, ``Any negative impacts from climate change were clearly 
overwhelmed by the benefits of increasing energy consumption.'' 
Can you add anything to that and clarify it even more?
    Mr. Wright. Yes, you bet. The arrival of hydrocarbons as 
meaningful energy sources, maybe a little more than 100 years', 
150 years' global life expectancy, has more than doubled. The 
number of people living in extreme poverty has gone from 90 
percent of humanity to less than 9 percent today. It is not 
zero yet, but the 20th Century is the greatest century of 
progress in human history.
    Mr. Cleaver. Thank you, Madam Chairwoman. Thank you, Mr. 
Wright.
    Mr. Wright. Thank you, Congressman.
    Mrs. Wagner. The gentleman's time has expired. The Chair 
now recognizes herself for 5 minutes.
    Mr. Roisman, the climate rule initially included Scope 3 
greenhouse gas emissions data, which would have forced 
Missouri's farmers to track all emissions being produced by 
their crops and livestock, an extremely time-consuming, costly, 
and sometimes impossible task. Although it was removed from the 
final rule, I still have serious concerns regarding the future 
of Scope 3 disclosures. Can you explain what the SEC could have 
done if it wanted to fully prevent companies from making Scope 
3 emissions disclosures? For example, could the SEC have 
considered preempting compliance with other jurisdictions, such 
as California, that require Scope 3 disclosures?
    Mr. Roisman. Yes, that would have been one way to do it. 
Additionally, I think they could have made an explicit 
statement in the rules saying we are not requiring any Scope 3 
disclosure requirements. And I think one of the concerns people 
have is, as you heard from Mr. Stebbins and myself----
    Mrs. Wagner. Yes.
    Mr. Roisman. ----is that a lot of us will be counseling 
companies that they will have to seriously consider whether 
they have to provide Scope 3 emissions, and, again, that is up 
and down the value chain. So, many people who wouldn't have 
thought that they had had to track any of this information are 
going to be getting calls from public companies saying, we need 
to find this out in order for us to comply.
    Mrs. Wagner. Can you explain why the uncertainty 
surrounding the future of Scope 3 emissions disclosures is 
troubling, outside of your current remarks?
    Mr. Roisman. I do think the SEC goes to great lengths in 
the release to talk about the difficulty of actually tracking, 
assessing, and cataloging all of this information. I think Mr. 
Wright did a very good job just talking about the difficulty of 
Scopes 1 and 2. And I think the problem is when things are put 
into an SEC filing, they come with a lot of liability and 
responsibility, including, oftentimes, having to sign your name 
on certain disclosure requirements and being subject to plenty 
of lawsuits. So, when you have sort of a measurement that is 
still not that well known or able to be quantified with 
precision, there is a lot of concern for companies on signing 
on the dotted line.
    Mrs. Wagner. Thank you. Mr. Wright, the SEC's decision to 
remove mandatory Scope 3 emissions disclosures gave many the 
impression that private companies are no longer affected by the 
rule. We know that is not true. Mr. Wright, can you tell us 
about how private companies, like Nomad, your co-petitioner in 
this lawsuit, are affected by the climate rule?
    Mr. Wright. Yes. I have been a lifelong technology 
innovator, and that is what Liberty Energy does. We invest in 
small companies that have exciting technologies that we think 
can make the energy system better. Part of it is reducing 
emissions or lowering pollution or lowering costs. We are 
passionate about all of these things, but Nomad is one 
example--I could give others--of private companies we have 
invested in that now we have some control rights, so they fall 
into our greater accounting. Now, they have to tally their 
emissions and we have to sign in a test that those are the best 
guesstimates, or whatever term we are going to use for that, I 
don't know. But yes, absolutely, big companies partner with 
small companies all the time.
    Mrs. Wagner. Professor White, Commissioner Peirce stated in 
her dissent that, ``The Commission performs impressive math-
crobatics to slash the anticipated cost of the rule by 90 
percent.'' Can you explain what costs the SEC left out of its 
analysis to artificially lower the anticipated costs?
    Mr. White. Yes, thank you. The statistic that Commissioner 
Peirce was referring to was the cumulative external burdens 
under the Paperwork Reduction Act, and it was specifically on 
Forms S-1 for registrations and the annual reports on 10-Ks. 
So, the cost estimate was reduced from $6.4 billion to only 
$600 million.
    Mrs. Wagner. $6.4 billion to what?
    Mr. White. To $600 million.
    Mrs. Wagner. So, that is the math-crobatics that 
Commissioner Peirce is talking about. Unbelievable. Carry on, 
please.
    Mr. White. Correct. And there was no detail provided around 
the Paperwork Reduction Act as to where that came from. Now, 
surely, some of this would apply to the removal of Scope 3 
emissions, but it is hard to imagine how that cost goes down by 
more than 90 percent, and it should certainly be explained. I 
tried to reproduce this in my testimony and was also confused.
    Mrs. Wagner. Right. I appreciate that. I have some 
additional questions that I will submit for the record. I 
appreciate all of your testimony. My time has expired.
    And I now recognize the gentlewoman from Ohio, Mrs. Beatty, 
for 5 minutes.
    Mrs. Beatty. Thank you, Madam Chairwoman, and thank you to 
the ranking member and to all of our witnesses here, thank you 
for all your comments, and your expertise that you have 
provided today. And certainly, we have heard a lot today, and 
frankly, over the last couple of years since this rule was 
first proposed, it seems like we have heard all about how 
disastrous and burdensome climate exposure would be, so let me 
just interject this. Climate should not be a political issue. 
It is a reality. We must face it head on rather than burying 
our heads in the sand, pretending that it does not exist or 
complaining that it would be too burdensome to address it.
    Investors have been asking for more disclosure. Fifty 
percent of the voters oppose Congress limiting their access to 
corporate business records, and as you mentioned, Professor 
Fisch, climate is just one small piece of what investors have 
been asking for. We should not be in the business of banning 
what American consumers and investors want just because it 
doesn't serve our political agenda.
    Consumers, everyday Americans are dealing with the effects 
of climate change daily. They are seeing insurance company 
withdrawals, spikes in premiums, and other limitations on 
coverage as a direct result of climate change. Instead of 
coming to their aid, we are still bickering about whether or 
not a problem exists. America knows a problem exists. 
Meanwhile, other countries around the world are filling the 
vacuum, and taking the lead while we sit back and, in my 
opinion, maybe even wasting our time.
    The SEC made significant changes. And I think it is worth 
noting that the SEC made significant changes to the final rule 
in response to feedback from businesses and other shareholders 
who submitted comments. They have bent over backwards, in my 
opinion, to address everyone's concerns while still 
establishing a comprehensive disclosure framework that meets 
investors' demands.
    Now, I know you have read all the reviews, and certainly, 
to one of our witnesses, as a former Acting Chair, I am sure 
you have gone through all of those thousands of thousands of 
comments you get. But to my Republican colleagues, it appears 
that it is still not enough. Stonewalling and refusing to 
compromise, to find workable solutions, I don't believe is any 
way to go.
    But now, in my few minutes left, let me go to you, 
Professor Fisch. Other countries are way ahead of the United 
States when it comes to sustainable finance and climate risk. 
For example, I have been advised that the European Union has a 
comprehensive climate disclosure regime that is already in 
effect. What would be the benefits of the SEC harmonizing its 
climate risk disclosure rules with other countries' disclosure 
standards?
    Ms. Fisch. I think there would be tremendous benefits. 
Number one, a company wouldn't have to be subjected to the 
uncertainty of which regulatory regime they are subject to. 
Number two, the company could have standardized one set of 
disclosures, one set of auditors, to the extent auditing is 
required, one set of advisors to help them frame the 
disclosures to comply. That would greatly reduce the costs, and 
that would simplify not just the cost for issuers, but it would 
also simplify the cost for investors.
    We have a global marketplace, not just capital markets, but 
businesses, right? So, harmonization would be a tremendous 
step. My view is, that is something the SEC should be 
considering going forward, the extent to which substituted 
compliance might be a possibility, the extent to which 
negotiation as opposed to separate rulemaking might provide 
some sort of global standard.
    Mrs. Beatty. Okay. And quickly, I understand that the SEC 
made significant changes to the final rule. And by the way, 
there was a female who also supported that, to my colleague who 
wanted to interject about another female, that the SEC made 
significant changes to the final rule in response to the 
comments on the original. How did the SEC make the final 
requirements less burdensome? And I have about 20 seconds.
    Ms. Fisch. As a lot of this discussion has focused on, the 
SEC reduced the requirement for carbon emission disclosures, 
eliminated the requirement that Scope 3 emissions be disclosed, 
even in situations in which they are material. The SEC extended 
the implementation period. The SEC reduced the number of 
disclosures that have to be made as part of the financial 
statements. The SEC reduced the oversight responsibilities of 
auditors. That is just a sample.
    Mrs. Beatty. Thank you.
    Mr. Barr. [presiding]. The gentlelady's time has expired. 
The Chair now recognizes himself for 5 minutes.
    As the witnesses well know, the Securities and Exchange 
Commission has a three-part statutory mission: protect 
investors; maintain fair, orderly, and efficient markets; and 
facilitate capital formation.
    Mr. Wright, on the issue of protecting investors, will the 
additional reporting costs and litigation risk that you have 
testified would result from this rule enhance or diminish the 
financial performance of your company and other similarly-
situated energy firms?
    Mr. Wright. Diminish.
    Mr. Barr. And would that then protect or harm your 
shareholders?
    Mr. Wright. Harm.
    Mr. Barr. Strike one. On the second part of the mission, to 
maintain fair, orderly, and efficient markets, Mr. Wright, what 
impact would the rule have on U.S. energy markets?
    Mr. Wright. I think on the margin, you would see less oil 
and gas production in the United States, but no change in 
demand, so necessarily more imports and almost certainly from 
countries with higher greenhouse gas emissions from their 
productions.
    Mr. Barr. So, it would have an impact on the 
competitiveness of U.S. energy markets relative to foreign 
energy producers?
    Mr. Wright. Correct.
    Mr. Barr. So, maintaining efficient markets, strike two. 
And third, to facilitate capital formation. Mr. Wright, will 
the rule help your company access capital? Would it facilitate 
capital formation in the energy sector?
    Mr. Wright. No.
    Mr. Barr. Strike three. It doesn't look like the SEC is 
fulfilling its statutory mission here.
    Mr. Roisman, Professor Fisch testified that the rule will 
increase the standardization and comparability of key climate-
related disclosures. In fact, Chair Gensler makes the argument 
that we need this rule for comparability and consistency. You 
testified, however, that you doubt that the SEC has achieved 
this goal in the final rule. Why are you right, and why is 
Professor Fisch wrong?
    Mr. Roisman. I don't want to be counter to Professor Fisch. 
My perspective is that if you are going to have a standard 
line-item disclosure, everyone is going to do it. The problem 
lies in the fact that a lot of these things are based on 
different assumptions. Each company is going to have to make 
tailor-made assumptions to itself and to its business, and 
because of that, it is really not going to be apples to apples.
    Mr. Barr. Let's settle this debate a little bit more, with 
all respect to Professor Fisch. Public companies, Mr. Roisman, 
will be required to disclose in the final rule information 
related to the financial statement effects of, ``severe weather 
events and other natural conditions.'' Mr. Roisman, in terms of 
severe weather events and other natural conditions, that 
appears in the final rule 205 times, and 158 times, 
respectively. Are either of these terms defined anywhere in the 
rule?
    Mr. Roisman. Natural conditions are certainly not. Severe 
weather events, you get a little bit of indication that might 
be tornadoes, earthquakes. I think what I would like to focus 
on is your point about the accounting treatment which is a 
severe weather event for a company, is very different based on 
where it is business is. Whether it is in Kentucky or in Poland 
or in Belize, companies are going to need to do different 
policies and procedures to track all of this information in 
different countries, in different areas. And all of this 
information needs to be tracked because there is a very, very 
low de minimis amount that if you hit it, you have to disclose, 
so this is going to be a very costly and, frankly, onerous 
burden.
    Mr. Barr. It doesn't sound like this will enhance 
comparability whatsoever. Professor Fisch also said that the 
rule only applies to large companies or large accelerated 
filers. Mr. Roisman, do you want to address this claim and the 
rules application to smaller public companies?
    Mr. Roisman. What I think maybe Professor Fisch was 
alluding to is the Scope 1 and 2 disclosure requirements, but 
small companies will be responsible for the regulation S-K 
disclosures as well as the S-X, which is the accounting 
information that is going to be in the audited financial 
statements. So, that is for all companies.
    Mr. Barr. Yes, all companies, exactly. All public companies 
are impacted by this rule. Professor White, final question to 
you. This issue of materiality, I think, is something that we 
talk about a lot. And Professor Fisch says that the SEC's rule, 
no problems here, because it limits disclosures to information 
that has materially impacted an issuer. Professor White, do all 
investors benefit when the SEC mandates disclosures that only a 
specific group of investors who concentrate on a single risk 
factor deem to be material?
    Mr. White. No, and there are a lot of special interest 
groups that are interested in information, that are not 
necessarily representative of all investors, so that what might 
be material to one investor might not be material to the 
reasonable or the average investor.
    Mr. Barr. Thank you. I think that is the key. Materiality 
needs to be about materiality of all investors, the reasonable 
investor, not just climate alarmists. With that, I yield back.
    The gentleman from California, Mr. Vargas, is now 
recognized for 5 minutes.
    Mr. Vargas. Thank you very much, Mr. Chairman, and I thank 
the ranking member, and, again, I want to thank all the 
witnesses here today. I appreciate your testimonies. I know 
that it is tough to leave work and come here and testify, and I 
appreciate that very much. I do always ask how many of the 
witnesses, and I do this every time--how many of you believe in 
climate change, that climate change is real? If you could 
please raise your hand. If you don't believe, you don't need to 
raise your hand. It is the same question. I want to be fair. 
How many people believe that climate change is real? If you 
could just please raise your hands. It is a bad question. Okay. 
So, the question is bad. I am going to go on to my next 
question because you seem to think that is a bad question.
    I heard this today, and I hear it all the time, ``the 
unaccountable bureaucrats versus elected officials,'' that 
somehow the elected officials have this special knowledge. 
Well, I have been an elected official for a long time, and I 
know a lot of elected officials. I trust the bureaucrats a lot 
more than I trust the elected officials because the bureaucrats 
oftentimes have special knowledge, especially in the field in 
which they are making decisions.
    It is interesting. We have an elected official here who 
looks up into the heavens and sees the total eclipse and thinks 
it is the eschaton, that somehow God is talking to us, and it 
is the end of times, that the rapture is about here. Look at 
the science. Well, eclipses happen all the time--numerically, 
we figure these things out--and so do earthquakes. It is not 
the foretold eschaton or the rapture. It is just science in the 
earth. And that is why I don't buy this whole notion that 
somehow these bureaucrats don't know what they are talking 
about. Oftentimes, it is really politicians who don't, but 
anyway, that is from experience, unfortunately, my own, too. I 
will throw myself into that group.
    But all that being said, I do want to ask this. Professor 
Fisch, you were given strike one, strike two, and strike three. 
You didn't even get up to bat. I think that is a little unfair. 
So, I want to give you the chance to answer those questions 
before you strike out. Again, in your view, how is the rule 
consistent with the SEC's three-part mission to protect 
investors; maintain fair, orderly, and efficient markets; and 
facilitate capital formation? You get up to bat this time--go 
ahead--before you strike out.
    Ms. Fisch. Thank you. As my written testimony details, this 
is information that investors have been demanding. This is a 
small tip of the information that investors have been demanding 
with respect to business risks, and sustainability challenges 
for companies, and it responds to the longstanding information 
asymmetry. Companies have this information, investors don't, 
and reducing that information asymmetry is what produces more-
efficient markets so that investors can choose the companies in 
which they want to invest. They can evaluate whether a business 
plan is resilient for the future and they can evaluate the 
quality of management.
    And something we haven't really focused on today is, 
investors do that not just by buying and selling securities; 
they also do that through exercising their governance rights. 
And part of the SEC's mandate is to provide meaningful 
disclosure so that investors can vote, so that they can vote to 
elect directors who are monitoring material risks, so that they 
can vote for or against shareholder proposals based on how well 
they think the company is doing. And how does that facilitate 
capital formation? Obviously, if you have strong quality 
markets, that is going to make it easier for companies to raise 
capital, and that is going to tailor the costs of capital to a 
company's business plan. And we see that in the fact that so 
many companies come to the U.S. capital markets to raise 
capital.
    Mr. Vargas. Professor, I don't give you a homerun, but a 
solid triple, standard triple. I think you did a good job 
there. Now, I do want to say this. You talked about the 
corporations. A lot of these corporations do, in fact, collect 
this information, as you said, because they think it is real. 
And you might not think it is a good question, but the reality 
is that they do compile this information. It is important, and 
climate change is happening, no matter what people think.
    I am from San Diego, and you don't think of floods in San 
Diego, but we just had a gigantic flood in San Diego, a 
thousand-year event, and it flooded a good portion of San 
Diego, and we had all of these problems, something we normally 
don't get. You can't buy insurance in large parts of California 
because of climate change. This stuff is real. Investors know 
it, companies know it, the information is there, they should 
disclose it, and that is what this rule attempts to do. I also 
wish they would have gone a little further with Scope 3, but I 
understand that at the moment, maybe it is not the right time 
to do it, but it has to go there at some point. And, again, I 
appreciate all of you being here, and, again, I thank the 
Chair. Thank you. I yield back.
    Mr. Rose. [presiding]. The gentleman yields back. The 
gentleman from Texas, Mr. Williams, is now recognized for 5 
minutes.
    Mr. Williams of Texas. Thank you, Mr. Chairman. The SEC's 
misguided climate crusade has clearly overstepped their 
statutory authority by requiring excessive costly and detailed 
climate-related regulations. Instead of meeting the needs of 
all investors, the SEC has shifted towards pandering towards 
progressive shareholders and green activists. This is a 
dangerous path to go down. It will have negative consequences 
for all investors. In the 886-page climate rule, the compliance 
cost has skyrocketed for public companies which must comb 
through the burdensome rule to ensure they are meeting all the 
requirements. The SEC must return to their core mission and 
protect the interests of all investors and public companies, 
not just those who are fixated on politicizing boardrooms and 
our capital markets.
    Professor White, could you elaborate on how this climate 
rule will increase costs and burdensome compliance requirements 
for public companies? And I have a follow-up for you.
    Mr. White. Certainly, the direct cost of the disclosure, as 
the SEC has estimated, is going to increase costs by upwards of 
20 percent, which is one of the biggest increases, at least 
that I am familiar with, in recent times. It is also going to 
have indirect costs or spillover costs in the sense that is 
going to, as Mr. Wright said, raise legal liability, and it 
could have a dampening effect on capital formation. So, those 
together are an enormous cost.
    Mr. Williams of Texas. I have a question for you, then. 
This climate rule will increase costs for public companies, we 
have said that, but many of these costs will also prove to be 
unbearable for small insurers or issuers, and another concern 
of mine is how this rule will affect small companies' ability 
to compete on a global stage. Specifically, that the increased 
reporting requirements and compliance costs will serve as a 
barrier to entry into global markets for smaller companies.
    The SEC's purpose is to allow American businesses to 
compete, not to try and tie them down with excessive compliance 
costs and burdensome regulations, which seems to be what we are 
going through with this Administration. One more time, 
Professor White, what impacts will these costs have on American 
competitiveness, especially regarding the ability of smaller 
companies to compete globally?
    Mr. White. Regulations always have a disproportionate or 
outsized effect on small companies, so these regulations I 
would expect to be more impactful to small companies. We might 
see fewer IPOs, we might see companies staying private longer, 
and we might see companies moving to other jurisdictions, which 
impacts us in terms of losing people, losing tax revenues. And 
your notion of creating an impediment, I like to view these 
types of regulations as being like a brick: While one rule 
might be a small block, eventually you have built a barrier to 
going public, and once that barrier is formed, we lose 
competitiveness on a global stage.
    Mr. Williams of Texas. Thank you. This climate rule will 
open various challenges for companies which are already public 
or for companies which are looking to go public. This rule is a 
significant barrier to entry and will surely dissuade companies 
from undertaking the necessary steps to go public in fear of 
the compliance burdens and costs to which they will be subject. 
And companies will face other challenges, like increased risk 
of litigation and the complexities and the challenges that will 
come with it. Because of this rule and the consequences it will 
bring, companies will have to shift their resources towards 
compliance and will have to sacrifice key services enjoyed by 
their shareholders or they will refuse to go public in order to 
protect themselves from needless attacks thrown at them by the 
SEC.
    Mr. Stebbins, can you expand on how this misguided and 
harmful rule will deter companies from going public? It's 
pretty simple.
    Mr. Stebbins. I think rules aren't passed in a vacuum, and 
I think you have to look at what has happened in the last few 
years in general, and this isn't the only rule that has been 
passed, right? It is very hard to be a public company right 
now, and I think all of these rules incrementally make it 
harder, including this one.
    Mr. Williams of Texas. Any time you hire these compliance 
officers, it takes away from the core mission bottom line, 
right?
    Mr. Stebbins. Say that again, sir. I'm sorry?
    Mr. Williams of Texas. I said compliance officers versus 
salesmen, that tells you the difference right there, right?
    Mr. Stebbins. There are certainly a lot of costs built in 
and there are a lot of costs built into this release--
attorneys, accountants, consultants, et cetera.
    Mr. Williams of Texas. Okay. Thank you for that, and I 
yield back.
    Mr. Rose. The gentleman yields back. The gentleman from 
Illinois, Mr. Casten, is now recognized for 5 minutes.
    Mr. Casten. Thank you, Mr. Chairman. Professor Fisch, I 
would like to start with you. My colleagues have talked a lot 
about the disclosure requirements for emissions. And just to 
confirm, a lot of this rule is about disclosing your exposure 
to climate change, not just your contribution to climate 
change, right?
    Ms. Fisch. Yes, that is correct.
    Mr. Casten. Okay. And right now, if I understand it, I 
think I have seen numbers that the average public company 
spends $500,000 per year complying with voluntary disclosure 
requirements?
    Ms. Fisch. That is one of the reasons that estimating the 
cost of compliance is so difficult because, of course, the SEC 
doesn't have access to the costs that each company spends on 
voluntary disclosure.
    Mr. Casten. Yes. So, if I am an investor or maybe if you 
are an investor, would you like to know the risks your 
portfolio is exposed to and which companies in your portfolio 
are contributing to that risk? Isn't that kind of the basis of 
being an informed investor?
    Ms. Fisch. Absolutely. I would want to know the risks, and 
I would like to know what the management is doing to respond.
    Mr. Casten. I realize I am preaching to the choir here, but 
our chairman started this by saying that the Democrats were 
going to say we are science deniers because we don't want to 
talk about materiality. This is so deeply right within the 
SEC's wheelhouse to understand risk, right? But by the way, the 
SEC does not have an obligation to ignore science, right?
    Ms. Fisch. That is right, yes.
    Mr. Casten. The last time I checked, Elizabeth Holmes 
committed financial fraud by misrepresenting medical science. 
FTX committed financial fraud by misrepresenting math, which is 
a science. There have long been people who have come to 
Congress and said, I need to misrepresent science. Here is one. 
James Black, in 1977, said that doubling CO2 gases in the 
atmosphere would increase global temperatures by 2 or 3 
degrees, and that man has a time window of 5 to 10 years before 
the need for hard decisions regarding changes in energy 
strategies might become critical. James Black was a senior 
scientist at ExxonMobil. He said that privately in 1977. He 
didn't say that publicly because that would have hurt their 
share price. Don't ignore science, folks.
    With that, I turn to you, Mr. Wright. In January 2023, you 
said, in a YouTube video, ``We have seen no increase in the 
frequency or intensity of hurricanes, tornadoes, droughts, or 
floods, despite endless fear-mongering media, politicians, and 
activists.'' In the same video, you said, ``There is no climate 
crisis. We are not in the midst of an energy transition either. 
Humans and complex life are simply impossible without carbon 
dioxide. The idea of carbon pollution is outrageous.'' Do you 
agree that you said all of those things?
    Mr. Wright. Absolutely.
    Mr. Casten. Okay. It is all bullshit.
    Mr. Wright. Which was wrong? Which one of those was wrong?
    Mr. Casten. Reclaiming my time, sir. The fact that you said 
that--I could go through countless Intergovernmental Panel on 
Climate Change (IPCC) reports that make it very clear to the 
contrary. I could go through countless reports from our own 
financial regulators that there are risks. We could talk about 
the number of places in the world where the wet bulb 
temperature now regularly exceeds 35 degrees Celsius, 95F, 
which is beyond the ability of humans to live for more than 6 
hours at a time in India, and Bangladesh, maybe not in your 
air-conditioned office, but this stuff is real.
    And I am not going to get into an argument with you, 
because ultimately, you don't matter. You are an 
interchangeable person who comes here and finds it useful to 
misrepresent science in order to create short-term value for 
your shareholders. There are thousands of people like you. You 
are going to be forgotten years from now. Maybe, your 
grandchildren will be embarrassed. I don't know, but what I 
know right now is that we have to act on this stuff. We are 
sitting here in a moment where we know these changes are 
happening.
    And I am sympathetic with you in the narrow sense, Mr. 
Wright, that in the last 10 years, oil demand in the United 
States has not moved, coal demand is down 40 percent, and 
natural gas demand has decoupled from GDP growth, and that is 
because renewables are surging. It is because EVs are surging. 
The markets are demanding things that you are not providing. 
Capitalism is hard, right? And when capitalism is hard, the 
worst thing in your world is that you might actually have 
informed investors. There is a reason why the whole oil and gas 
exploration and production (E&P) sector is, on a good day, 
lucky to get a 10 times earnings multiple, and the clean energy 
sector is running at 20, 30 times multiple. They are getting 
cheaper access to capital. You all are building an industry to 
export, to sell your product to places where people don't have 
access to capital. Maybe, you don't care. Our job here is not 
to protect Liberty Energy investors. It is to protect markets. 
It is to protect all investors. It is to make sure that 
capitalism works. And I hope that someday that is not partisan, 
even if it is scientifically true. I yield back.
    Mr. Rose. The gentleman yields back. The Chair would just 
remind all of our Members to display proper decorum. Mr. 
Wright, we thank you for being with us as a witness today.
    The Chair now recognizes the gentleman from Georgia, Mr. 
Loudermilk, for 5 minutes.
    Mr. Loudermilk. Thank you, Mr. Chairman. Mr. Wright, I will 
start with you. It is amazing to me how some people here in 
this body are very selective with the science that they want to 
accept, right? We were wanting to follow the science with 
COVID. There is gender identity. It seems that they want to 
selectively follow science. You were cut off, I think rudely. I 
wanted to give you an opportunity to respond to Mr. Casten, but 
also to Mr. Vargas, who asked the question about whether or not 
you believe in climate change, and you responded that that 
wasn't a fair question. So, I want to give you a few moments to 
respond to both of them.
    Mr. Wright. Thank you, Congressman. Look, climate change 
and energy are just simply too important to get wrong, to make 
bombastic, non-fact-based statements, which is why I say it is 
not about belief, it has become religion. That is very 
unfortunate. This is a science-based technical topic. We should 
study climate change, understand the risks there, understand 
the downsides, understand the upsides, and then, look at our 
energy system.
    And ultimately, it is about what is the best set of 
tradeoffs to make there, and what the world has done in the 
last 2 decades. It has actually been a pretty poor calculus in 
that. We have spent somewhere between $4 trillion and $10 
trillion, depending on how you want to count it, dominantly for 
wind and solar, which just crossed 2 percent of global energy, 
and everywhere they have large penetration, you have more-
expensive electricity and less-stable grids. They are not 
threats to oil and gas. I feel zero threat whatsoever.
    I went to college to work on fusion energy at MIT. I worked 
on solar energy at UC Berkeley. I have worked on geothermal 
energy for 30 years. I am not some partisan defending the oil 
and gas industry; I am just a believer in the fact that energy 
matters. We still have 2 billion people cooking their daily 
meals, burning wood, dung, and agricultural waste, with about 3 
million deaths a year from that, and we are going to stand in 
the way of them getting propane so they can have clean, long, 
healthy lives like us? That is just crazy, and everything I 
said in that video is true, and is actually in the IPCC 
reports.
    People talk about them or the summary from policymakers, so 
I am very careful about that. This book that I think I sent to 
every member, including Representative Casten, has all of this 
data. It is all referenced. This isn't made up. This isn't 
denying from my industry. This is just being sober and honest 
about energy and climate change.
    Mr. Loudermilk. I appreciate that, and it is political 
science here. The science that is accepted is based on what is 
good in popular politics is what you find here in this 
building. Mr. Wright, while I have you, quickly, I understand 
your company, Liberty Energy, successfully sued the SEC to stay 
the rule in the U.S. Court of Appeals for the Fifth Circuit. 
Then, after the stay was lifted, just last week, the SEC 
decided to voluntarily stay the rule on its own. Did the SEC's 
decision to change course come as a surprise to you?
    Mr. Wright. I am not good at predicting those things, but I 
guess it was a pleasant surprise.
    Mr. Loudermilk. What was your reaction to the news based on 
the SEC's tone, when just a few weeks earlier, they were in 
court arguing against Liberty Energy's push to stay the rule?
    Mr. Wright. Yes. Again, I can't handicap that. I think the 
stay is a good thing. This issue should be litigated. We should 
decide what the right answer is, and we will all live by the 
answer that comes down.
    Mr. Loudermilk. Okay. Mr. Roisman, I am concerned that the 
SEC is misleading the public about the impetus for their 
climate rule. The Commission has repeatedly asserted that the 
final rule's climate disclosures are a direct response to 
investor demand, but it is unclear who those investors even are 
and how useful the information required by the rule would be 
when making investment decisions. Is it possible the SEC is 
responding to some other pressure, such as pressure from 
activist groups to finalize the climate disclosure rule?
    Mr. Roisman. I think this was certainly a concern raised by 
the two dissenting Commissioners about this being more 
political in nature than substantive. Now, I think it should be 
noted that there are investors who want this, and there are 
investors who don't want this. The test has always been the SEC 
is trying to provide information so people can make an informed 
investment decision, and that usually is tied to financial 
returns. One of the things that the dissenting Commissioners 
talked about was that a lot of the proponents of the rule may 
have sort of a focus on nonfinancial or pecuniary returns, and 
that is perfectly fine, but that is not historically what the 
SEC does in terms of mandating disclosure.
    Mr. Loudermilk. Quickly, can you explain the difference 
between having the companies file these disclosures that they 
were forced to do as opposed to furnishing them, and why that 
difference matters?
    Mr. Roisman. The difference matters in terms of liability 
risk, in terms of plaintiff lawsuits and other litigations 
there.
    Mr. Loudermilk. Okay. Thank you. I yield back.
    Mr. Rose. The gentleman yields back. The gentlewoman from 
Massachusetts, Ms. Pressley, is now recognized for 5 minutes.
    Ms. Pressley. Thank you, Mr. Chairman. Listening to my 
colleagues across the aisle as they talk about the recent 
climate disclosure rule, the American people might be inclined 
to believe that the SEC had no basis for taking on this issue 
and that there is no climate emergency. I think that is what 
some people might refer to as fake news, when, in fact, at the 
last hearing on providing transparency for investors by 
requiring climate disclosure, I was encouraged to hear SEC 
Chair Gensler confirm on the record that investors responded 
favorably to the proposed rule as it was previously designed.
    So, the SEC understands that we must take action to protect 
our financial system. That is why I am disappointed that the 
final rule is significantly weaker. It fails to fully deliver 
the informational Scope 3 emissions that investors want, and 
this has consequences for millions of workers and families, 
whether it is personal retirement savings or college savings 
for a child. Investments are at greater risk due to this 
weakened rule. Ninety-seven percent of investor comments were 
in favor of the proposed rule. This supported the inclusion of 
Scope 3.
    Ms. Fisch, can you explain how folks would benefit from 
data on Scope 3 emissions from U.S. companies?
    Ms. Fisch. Thank you. Yes, Scope 3 emissions allow a 
company to assess what risks am I exposed to based on the 
regulation, the demands, the environmental impact on my 
customers, on my suppliers, on my employees, on the world in 
which I operate. So for example, to the extent that a company's 
supply chain is vulnerable, that is a material business risk, 
right? It doesn't matter how you feel about climate change. 
That is something that a company has to plan for. That is 
something that a company has to take into account.
    For example, we get our water from a particular supplier, 
and that water supply is limited, is threatened. This might be 
a good time to diversify. So, investors need to understand 
those kinds of questions as well as the extent to which 
management is informing itself and making the hard choices. And 
the hard choices may or may not be to take a particular 
climate-oriented approach, but it is knowing the information 
and guiding your company so it is going to be sustainable in 
the future.
    Ms. Pressley. Thank you. Ms. Fisch, there are trillions of 
dollars implicated by the SEC Climate Disclosure Rule, but my 
Republican colleagues want it to be even weaker. Do you agree 
that it should be a strong rule that helps our economy?
    Ms. Fisch. I do believe it should be a strong rule. And I 
have to say, I am persuaded by some of Mr. Roisman's questions 
that to the extent the SEC has limited some of the disclosures, 
that does reduce information in the market, and that does 
reduce comparability. So a stronger rule would have, I think, 
been even better tailored to the SEC's goals of protecting the 
markets and investors.
    Ms. Pressley. Very good. I am calling on the SEC to 
reconsider its position to include climate risk disclosure on 
Scope 3 emissions to protect investors and to safeguard our 
financial system. This is not the time to backtrack and to 
weaken regulations. This is the time to strengthen them. Thank 
you. I yield back.
    Mr. Rose. The gentlelady yields back. I now recognize 
myself for 5 minutes, and I will begin by thanking Chairman 
McHenry and Ranking Member Waters for holding this hearing, and 
a particular thank you to our witnesses today. I know you 
volunteer your time to do this, and we appreciate you sharing 
your expertise, and we hope that you regard this as a 
productive and enjoyable enterprise.
    Three weeks ago, our Oversight and Investigations 
Subcommittee visited Tennessee's 6th District, my district, to 
speak with regulatory victims of this rule. After that hearing, 
I was further determined to speak out against this rule and 
expose what I believe is Chair Gensler's detrimental conduct. 
Mr. Wright, part of this awful rule, in my estimation, is the 
inclusion of Scope 2 disclosure requirements. This requirement 
would, of course, mean that publicly-traded companies will have 
to disclose how much greenhouse gas is generated through their 
electricity usage.
    The execution of this will be especially problematic for 
publicly-traded companies in Tennessee, and in my district, 
Tennessee's 6th. In Tennessee, the Tennessee Valley Authority 
(TVA) generates electricity and sells it to utility companies 
which then distribute the electricity to these publicly-traded 
companies. This rule will mean that TVA must work with the 
distributors to ensure that companies are provided with 
accurate Scope 2 figures. From your company's perspective, can 
you talk about the level of difficulty in producing these Scope 
2 disclosure reports and calculating the costs of energy 
generation?
    Mr. Wright. Yes. I wish I knew a more accurate answer to 
that. But we do business in 12 States, in all different rural 
areas, from one-off jobs out in Utah where there is no oil and 
gas where we are doing work for geothermal, so it is all over 
the place. So yes, to think everywhere we source electricity 
from or heat or cooling or other energy sources, that will be 
very tricky to do, and, of course, we will just be getting 
someone else's guesstimates of the numbers for our data to add 
to our own guesstimates.
    Mr. Rose. Sure. And I would just say that the scope of this 
rule, in my view, is clearly intended to provide information 
for blame-and-shame exercises beyond the materiality 
requirements that have historically guided disclosure. And it 
strikes me that if this is material, then everything is 
material, and if everything is material, then nothing is 
informative for the investing public.
    Mr. White, as a professor at Vanderbilt University, my alma 
mater, you are likely aware that the State of Tennessee manages 
assets for public workers and retirees across the State. The 
managers of these funds are focused on maximizing returns, not 
social or political agendas. Is there any net financial benefit 
that public workers and retirees could expect to see in their 
assets or managed funds due to this rule?
    Mr. White. Thank you for the question. Certainly, pension 
funds and retirement funds have a fiduciary duty to their 
investors, and that is to maximize their returns so that they 
can use that money in retirement. The extent that the cost of 
this rule outweighs the benefit, would be detrimental to them. 
The SEC already has its 2010 climate guidance in terms of 
requiring material disclosures around climate. So, if that is 
material to registrants, they should already be disclosing it, 
which means that additional disclosure burdens would have 
limited benefits and thus impact returns negatively.
    Mr. Rose. Thank you. I appreciate that and agree with your 
observations. Mr. White, could the funds that they will have to 
allocate towards compliance be better spent towards growth, 
fueling stronger returns for Tennesseans?
    Mr. White. Yes, absolutely. In fact, I have a study with 
Professor Craig Lewis, also at Vanderbilt, that looks at the 
2012 Jobs Act, and companies used compliance savings which 
exempted them from costly provisions like Sarbanes-Oxley. They 
used that money instead of compliance by investing in their 
science, so every dollar that goes to compliance is a dollar 
that you are not investing for growth and returns. And so, yes, 
it would impact them negatively.
    Mr. Rose. Thank you. Mr. Stebbins, as a lawyer myself, and 
an investor myself, I want to be extremely clear, and I know 
this point has been made. But are public companies under the 
current materiality doctrine already required to report every 
piece of material information?
    Mr. Stebbins. That has been made very clear, I think, in 
the 2010 guidance, and subsequently in many later statements 
from the SEC, whomever has been running the SEC at the time, 
Chairman Clayton, or Bill Hinman, the Corporation Finance 
Division Director. So yes, it is extremely clear.
    Mr. Rose. Thank you. I appreciate that. I see my time is 
about to expire, so I yield back. And I recognize the gentleman 
from Nevada, Mr. Horsford, for 5 minutes.
    Mr. Horsford. Thank you to the chairman, to the ranking 
member, and to our witnesses for your time and for being before 
us today to discuss yet another manufactured culture war that 
has nearly nothing to do with the critical issues facing our 
country's financial systems.
    Unfortunately, we are here relitigating the same arguments 
over an unrelatable SEC rulemaking when we should be working on 
the issues that actually matter to our constituents. The 
Majority seems wholly uninterested in tackling the hard 
questions that we face as a nation today. Anyone who has been 
to my district knows that the number-one issue we face is the 
high cost of housing. To show just how dire this crisis has 
become, I ask unanimous consent to enter into the record a 
January article from the Las Vegas Review-Journal entitled, 
``Las Vegas home prices going up 5 times faster than wages, 
report says.''
    Mr. Meuser. [presiding]. Without objection, it is so 
ordered.
    Mr. Horsford. This article outlines the particularly 
painful point that, according to recent Zillow data, from 2011 
to the end of 2022, home price growth in Southern Nevada has 
far outpaced wage growth in the same time frame. It is such a 
pressing crisis for folks in my State because Nevada led the 
country over that time frame with an astounding six-fold 
increase in the ratio of home prices to wages, six-fold over an 
11-year period.
    However, this should surprise no one, given that Nevada is 
already short approximately 80,000 units of housing that is 
affordable, and the volume of home sales has bottomed out at 
its lowest since 2008. These are real challenges that demand 
real solutions, and yet, my colleagues across the aisle have 
none. The housing legislation that they have posted for our 
most recent markup would do nothing to address these 
skyrocketing costs, and one bill would actually make it easier 
for landlords to evict their tenants. Their lack of interest in 
finding answers to these questions is why we are holding 
hearing after hearing to debate the merits of climate change 
instead of debating the merits of the necessary fixes to the 
housing market that my colleagues and I have advanced.
    Everyday Nevadans are in the fight of their lives, and 
unfortunately, they are up against some of the wealthiest and 
most-sophisticated investors in the country. It is time for us 
to stand up for the people.
    I ask unanimous consent to enter into the record a Nevada 
Independent article entitled, ``It's time to take back our 
housing from Wall Street.''
    Mr. Meuser. Without objection, it is so ordered.
    Mr. Horsford. The reality for our communities is a stark 
one. As this article points out, displacement is the norm in 
our communities. North Las Vegas residents regularly confront 
exorbitant rates, soaring housing costs, tenant exploitation, 
and eventually, eviction notices. Last year, I had the 
opportunity to see firsthand just how destructive these abuses 
can be when I was able to attend an eviction proceeding at the 
North Las Vegas Justice Court on behalf of my constituents.
    Out-of-State corporate investors are preying on the most 
vulnerable among us, and we need broad Federal legislation to 
address the issue and hold these firms accountable for their 
unfair abuses that they impose upon our communities. But we can 
only do that, Mr. Chairman, if we hold meaningful hearings to 
debate the merits of potential solutions, potential solutions 
like my Housing Oversight and Mitigating Exploitation (Home) 
Act, which would empower HUD to curb the very worst of the 
predatory behaviors that we see in the housing market today.
    Don't take my word for it. Come to my district and hear for 
yourselves stories from people like Katrina Paul. Katrina has 
been working with her REALTOR to finally achieve the dream of 
homeownership. However, she has been thwarted at every turn. 
Katrina has made 18 offers on homes during the recent surge in 
Las Vegas' housing market, and she has been outbid on every 
single one. She has been outbid by cash buyer after cash buyer, 
and through no fault of her own, she is forced to continue to 
rent an apartment that is too small. Her only dream, like so 
many across this country, is the dream of finally owning her 
own home.
    This story is far too common across Southern Nevada, where 
hardworking people are stuck making rent payments each month 
when they should be investing in the equity that helps to build 
wealth for themselves and their family. So people like Katrina 
will continue to be forced to delay that dream and that wealth, 
if they are ever able to have it come true at all.
    Mr. Chairman, I just ask you, out of respect----
    Mr. Meuser. The gentleman's time has expired.
    Mr. Horsford. ----for my constituents, to prioritize my 
legislation and that of my colleagues dealing with housing 
affordability, and let's address the crisis that is before our 
constituents now in this Congress.
    Mr. Meuser. The gentleman needs to respect the time.
    Mr. Horsford. I yield back.
    Mr. Meuser. The gentleman from South Carolina, Mr. Timmons, 
is now recognized for 5 minutes.
    Mr. Timmons. Thank you, Mr. Chairman, and thank you to our 
witnesses for being here today to discuss the recently-
finalized climate disclosure rule. Time and time again, the 
Biden Administration has leveraged so-called independent 
regulators to achieve political goals they can't accomplish 
through Congress. And SEC Chair Gary Gensler may just be 
President Biden's most-effective tool in this strategy, 
promulgating rules that turn our capital markets on their heads 
in order to promote inflation-driving Green New Deal policies, 
rather than reinforcing their fiduciary duty to create wealth 
for investors. It is quite evident that all investors are 
united by their shared concern for financial return and are 
divided on how important they consider non-economic factors 
such as climate change.
    By requiring extensive climate-related disclosures, the SEC 
has opened the door for activists to lobby for the mandatory 
disclosure of other non-economic information. There are a 
multitude of concerns with the SEC's recent efforts to 
influence the way company boards and management operate. For 
example, the recently-finalized cybersecurity rule requires 
detailed, potentially non-material risk management and 
governance disclosures to dictate the way companies should 
handle cyber risk. The climate rule goes even further, 
requiring management and boards to make complex judgments about 
climate risks, some of which are admittedly not material.
    Mr. Roisman, would you explain what problems arise when 
regulators impose overly-prescriptive requirements relating to 
board governance and risk management?
    Mr. Roisman. Thank you for the question. I think this sort 
of stems from the idea of, do you continue a principles-based 
disclosure regime where companies are in the best position to 
tell investors what they think is material, and then, when 
regulators, say, provide line-item disclosures about each one. 
The problem you alluded to, which I have heard before, is 
sometimes called the federalization of corporate governance, 
where, by requiring regulations to disclose things about boards 
and management, are you trying to push boards and management to 
act in a certain way?
    And with the cyber rule and the climate rule, in the 
proposal, there was this concept that you needed to disclose 
the expertise on the board with respect to cyber or to climate. 
Both were struck out of the final rule, but some of the 
comments that people received, or that the SEC received were, 
are you essentially telling us that we need to have a climate 
expert or a cyber expert on the board, because there are many 
reasons to be on a board. So I think the concern people have 
is, if you require some of these disclosures, is this in effect 
trying to effectuate change? And the SEC is a disclosure 
agency. It is not an agency that is supposed to dictate how 
companies act.
    Mr. Timmons. Sure. Thank you for that. Mr. Stebbins, in a 
paper entitled, ``The Economics of ESG Disclosure Regulation,'' 
your former colleague, Dr. Kothari, suggests that climate-
related financial risks are not as significant as other risks 
such as interest rate risks, inflation risks, recession risks, 
and many others, where granular prescriptive disclosures are 
not mandated. Does the climate rule risk misleading investors 
into believing climate risks are more significant than other 
risks?
    Mr. Stebbins. I think that is a concern that has been 
raised--Commissioner Peirce raised it in her dissent. 
Commissioner Roisman, next to me, just mentioned that you are 
trying to push certain behaviors as opposed to just regulating 
by requiring disclosures of certain things. You are trying to 
push boards and companies to act in a certain way rather than 
just doing what they know, what they consider to be in the best 
interest of the shareholders, and they certainly know better 
than the regulatory agency. I think that would be the main 
concern with that. And also, I think Commissioner Peirce 
mentioned that it is climate. What is next, right? What is the 
next social issue?
    Mr. Timmons. I am going to follow up on that. Does this not 
disadvantage U.S. businesses in the global markets, because 
businesses in foreign countries, other than Europe, don't have 
these additional requirements, and they are focused on a return 
on the investment, not other variables that are not core to 
their business function. Is this going to create a challenge 
for U.S. businesses to compete in the global economy?
    Mr. Stebbins. I think unquestionably it does, yes.
    Mr. Timmons. I think that is a major problem, and my 
district has been the victim of Federal policy that has sent 
tens of thousands, hundreds of thousands of jobs overseas. And 
we need to focus on competing in the global economy, and this 
Administration is on the wrong track. With that, Mr. Chairman, 
I yield back. Thank you.
    Mr. Meuser. The gentleman yields back. The gentlewoman from 
Texas, Ms. Garcia, is now recognized for 5 minutes.
    Ms. Garcia. Thank you, Mr. Chairman, and thank you to all 
of the witnesses for being here today.
    Well, here we are again. I think this is the 6th hearing we 
have had on the SEC, and the 12th on climate change. I am 
hearing a lot of more of the same. As we continue to debate 
whether climate risk is a financial risk, the climate crisis 
continues to get worse and consumers are paying the price 
because it goes on and on. Families and hardworking Americans 
in my district are dealing with insurance company withdrawals, 
insurance cancellations, and premium spikes in Texas. In fact, 
Mr. Chairman, I was stunned during our 2-week break, because my 
own homeowner's insurance, which was about $9,500, is now 
$13,600. That is a huge spike.
    So, anybody who tells me that the weather does not impact 
climate change needs to come to Houston where we have suffered 
from hurricanes, flooding, storms--one last night--freezes. So, 
this whole notion that it isn't real, to me, it is just 
dumbfounding. In fact, even the recent fires in Texas cost the 
Rangers at least $102 million. Millions and millions of acres 
were on fire. Investors are clamoring for these climate 
disclosures. I have heard it. I know that people in my 
district, even though they are not investors, are clamoring for 
it. These disclosures not only promote better transparency to 
inform consumers and investors, but also help the industry 
track their environmental, social, and corporate governance 
goals.
    Professor Fisch, I keep hearing the sky is falling, because 
this is going to happen. Companies are going to leave. They are 
not going to invest. They are not going to do all these things. 
Is there any real data to support that? Don't you see investors 
demanding this climate disclosure as I have?
    Ms. Fisch. Absolutely. And part of the reason the SEC's 
final release was so long is because the SEC, which is deeply 
immersed in the market and in deep conversations with investors 
with summarizing the thousands of investor comments saying we 
need this information and explaining why this information is 
important. And I should just say that the investors' 
perspective by and large is that this information is important 
to our financial assessment.
    Sure, investors can invest for a variety of different 
reasons, but the large investors, the institutional investors 
are saying this information is financially material. This helps 
us investigate, is the company going to lose its insurance 
coverage? Is the company going to lose physical assets to a 
flood or other event? And again, we don't have to debate, is it 
human cost, is it climate change, or is it just some random 
flood? The point is these are business risks. This is economic 
vulnerability that investors are demanding.
    And I should just say that the discussion earlier that the 
SEC should prevent companies from disclosing Scope 3 emissions, 
number one, if there are any First Amendment problems, the idea 
that the SEC would tell companies you can't disclose what the 
market wants, what your investors want, to me, that is just 
incredible. The other is that disclosure is designed to 
facilitate the market responding to and evaluating this 
information. This is not some heavy-handed merit-based 
regulation. We have these capital markets. Investors say they 
need this. Let's give them what they want.
    Ms. Garcia. Right. And do you have any data on the number 
of investors who did file comment letters and how many of them 
supported climate change and how many didn't?
    Ms. Fisch. There were thousands of comment letters--how you 
quantify it depends a little bit on whether you are looking at 
individual comment letters. In this kind of thing, there are a 
lot of form letters as well, but basically, 99 percent of the 
investors said, we support Scope 1 and 2 emissions disclosure, 
and 97 percent said, we support Scope 3 emissions disclosure. 
The numbers are just overwhelmingly high.
    Ms. Garcia. Okay. Now, something else caught my ear that 
one of my colleagues said earlier. As a layperson, I was a 
little offended. It almost sounded like they think that these 
disclosure requirements are too complicated and too high level 
for the average investor to understand, the noninstitutional, 
the retail investor. What is your reaction to that? Do you not 
think that the average person understands that the climate 
change issue is higher risk, so we should know about it? To me, 
it seems simple.
    Ms. Fisch. I think there are a whole range of retail 
investors out there with different levels of understanding. 
There are financial reporters, there are securities analysts 
that can help investors understand that information. There are 
intermediaries like asset managers that can help investors. But 
at the end of the day, investors are entitled to this 
information. They are entitled to use whatever resources are 
available to them to evaluate the information, and they are 
entitled to invest according to their preferences.
    Ms. Garcia. Not very complicated, isn't it?
    Ms. Fisch. No.
    Ms. Garcia. Thank you. I yield back.
    Mr. Meuser. The gentlelady's time has expired. Mr. Steil is 
now recognized for 5 minutes.
    Mr. Steil. Thank you very much, Mr. Chairman. I want to 
dive back into materiality because I think we are missing what 
might be one of the most important topics here today, and we 
are speaking past that. I listened to you, Professor Fisch, and 
you said, I think, something along the lines of, investors want 
it, so give them what they want. And then you cited a study, I 
think, that reviewed 320 institutional investors and you came 
up with 97 percent. It is an incredibly small sample of people.
    I would say what people really want is material 
information, rather than allowing activist investors or the 
loudest voices in the room to dictate what is or what is not 
disclosed, because as noted through today's conversation, the 
disclosure process is incredibly expensive and time-consuming. 
There is an appropriate need for that if it is material, but if 
it is not material, it is simply an activity to abate those 
that want it--your term, right, ``those that want it.'' You 
would say, as I listened to you, give them what they want. Do 
you concern yourself with whether or not the information, 
``that they want,'' is material? Yes or no, does materiality 
matter to you in this context?
    Ms. Fisch. Materiality absolutely matters to me.
    Mr. Steil. Okay, great. So, it matters to you. Should it be 
definitive as to whether or not the information is disclosed? 
As a core tenet of securities law, do you believe that if the 
information is not material, that it is, therefore, not 
material and does not need to be disclosed?
    Ms. Fisch. I guess I am not----
    Mr. Steil. No, no, no. Just yes or no. Do you think if it 
is material, that it matters?
    Ms. Fisch. I guess I don't think that materiality is as 
clear a binary as you are suggesting, and so there is----
    Mr. Steil. It is pretty darn clear, right? There is plenty 
of securities case law on this point and topic. There are 
significant boardroom discussions on this. Every securities law 
attorney goes through a thorough process with public companies 
to determine whether or not information is material. This is 
heavily litigated. It is very clear. There is plenty of case 
law on the topic. I would encourage you to read further into 
this, but let's go one step further. If it is or is not 
material, does it need to be disclosed?
    Ms. Fisch. The Supreme Court case law is----
    Mr. Steil. But do you think----
    Ms. Fisch. ----in securities fraud.
    Mr. Steil. Do you think----
    Ms. Fisch. And securities fraud is different from the SEC's 
power required to do this----
    Mr. Steil. No, you could sue on filings for lack of 
disclosure, and so what I am asking you is, do you think that 
the information needs to be material?
    Ms. Fisch. Do I think which information needs to be 
material? The information----
    Mr. Steil. Do you think the SEC should require people to 
provide information that is not material to investors? Is that 
your position?
    Ms. Fisch. I think the SEC has done that and will continue 
to do that.
    Mr. Steil. And you think they should in this case?
    Ms. Fisch. I think the SEC has a long tradition of 
requiring disclosure----
    Mr. Steil. I am not asking about their tradition. I am 
asking a very clear question, ma'am. I am asking whether or not 
you think the information, if it is not material, should still 
be disclosed. Yes or no?
    Ms. Fisch. I think the SEC has a long history of requiring 
disclosures that are----
    Mr. Steil. I am not asking about the history, ma'am. So, a 
notice to those watching this, we are going to ask one more 
time because it is a very clear question: If it is not 
material, should it be required to be disclosed? It is a simple 
question.
    Ms. Fisch. This rule doesn't require any disclosure of non-
material information. You are asking about this rule and not--
--
    Mr. Steil. Okay. Let's pause there, because you are really 
fighting to not say that you want non-material information to 
be disclosed, because now you are saying it is material. If it 
is not material, is it correct that you are okay with it not 
being disclosed because it is not material?
    Ms. Fisch. No, I didn't say that.
    Mr. Steil. Right. I am trying to have a conversation.
    Ms. Fisch. Right.
    Mr. Steil. So, yes or no, non-material information needs to 
be disclosed, in your opinion?
    Ms. Fisch. I think there are any number of----
    Mr. Steil. So, you can't even give me a yes-or-no opinion. 
Why? Because materially is the cornerstone of securities law. 
If you have a background in securities law, it is really tough 
to say on the record that you want non-material information to 
be required to be disclosed. And when we hear this time and 
again from my colleagues on the left, they want non-material 
information to be disclosed all the time. We have seen human 
resources (HR) policies put forward. We have seen policies that 
relate to climate put forward. Those of us on the right agree 
that when those policies are material, they should be 
disclosed.
    So if you are Exxon, there is probably a materiality 
threshold and you should probably put it forward. If you are an 
HR consulting company, it is probably not material, and it 
probably doesn't need to be disclosed. But there are those on 
the left who want to play to their activists, who are 
unconcerned about the economic burden being passed on to every 
consumer in the United States of America, and who have no 
problem with the fact that through red tape, we drive inflation 
higher, and we discourage U.S. companies from going public. And 
on the record, a simple yes-or-no question, we have seen it 
refused to be answered at least 4 times, which is beyond 
frustrating. It is why we have to continue to fight against 
non-material information being required to satisfy activist 
investors. Mr. Chairman, I yield back.
    Mr. Meuser. The gentleman yields back. The gentlewoman from 
Michigan, Ms. Tlaib, is now recognized for 5 minutes.
    Ms. Tlaib. Thank you, Mr. Chairman. I think so many people 
always forget how many times the American taxpayer has bailed 
out folks for just really hiding the truth from the public, 
especially in areas that we know are risks. And folks want to 
agree, but they don't actually want to do anything about the 
fact that climate risk is a financial risk.
    In my community, I cannot tell you how many times we have 
had floods. They say, this is a record flood, and I am like, I 
don't know. This is four in a row, but we continue to say, 
let's do nothing. But then, when these financial institutions 
making these real huge risks, putting really our economy at 
risk, we bail them out. We bail them out instead of telling 
them to do what is right, which is providing information so 
that we can make much more informed decisions. So if your 
company has gone all in on an outdated business model, then 
workers who have put their savings into a company deserve to 
know that.
    I just don't understand why we are so hesitant in doing it 
other than the fact that they don't want to consider this a 
risk because, for them, they will just get bailed out by the 
United States, that we, the American taxpayer, will just bail 
them out. That is exactly what we continue to do, and you all 
know it. You do. We always do when they don't tell us the truth 
or they are not disclosing what is necessary for us to make 
those informed decisions.
    Professor Fisch, can you explain what climate-related 
physical and transition risks are and provide some examples?
    Ms. Fisch. Climate-related physical and transition risks, 
and I have several examples in my written remarks, include 
things like the vulnerability of physical assets to what you 
just said, to floods, to extreme weather events. Last week, in 
Philadelphia, we had an earthquake, so everyone went around and 
inspected the buildings to see if they were structurally sound. 
That is a physical risk that a company might have to take into 
account.
    Transition risks include responding to whether you think 
there are climate-related risks, whether you think there are 
regulatory risks, whether your cost of power or the sources of 
power that you are entitled to use are going to go up, whether 
natural resources like water supply are going to be vulnerable, 
right? Those are all risks that face any company.
    Ms. Tlaib. So, we are talking about transparency?
    Ms. Fisch. Yes.
    Ms. Tlaib. Yes. Professor Fisch, does the SEC rule require 
companies to reduce their greenhouse gas emissions or install 
solar panels, anything like that? They are not asking them do 
that, right?
    Ms. Fisch. Absolutely not, and in fact----
    Ms. Tlaib. They are talking about just disclosing first, 
right?
    Ms. Fisch. Yes.
    Ms. Tlaib. Okay. I just want to make sure because folks are 
saying that, and that is not truthful. I would like to turn now 
to concerns about compliance costs. That is another one. This 
is interesting. We are talking about companies that just have a 
ton of money, and, again, we just bailed them out. The Wall 
Street Journal has reported that roughly 3,000 U.S. companies 
will have to make disclosures to comply with the European 
Union's corporate sustainability reporting directive.
    Professor Fisch, can you compare the EU's reporting 
standards with those in the SEC's final rule? Which reporting 
framework is more demanding?
    Ms. Fisch. The European standards are way more demanding. 
It is reporting not just on climate-related risks, but a 
broader stretch of environmental risks. It is reporting on 
other sustainability issues as well. The European reporting 
system will require disclosure of Scope 1, 2, and 3 emissions. 
It will require disclosure not limited by economic materiality 
to investors. Europe applies a double----
    Ms. Tlaib. I am not trying to simplify it. Wouldn't they 
just have to copy what they are already providing to the EU?
    Ms. Fisch. Well, a substantial number of U.S. companies are 
going to be subject to that regime, yes.
    Ms. Tlaib. Okay. Because they are complaining about 
compliance costs, and I am like, don't you have to do the 
reporting for the EU, which is much more demanding?
    Ms. Fisch. Yes, that is true.
    Ms. Tlaib. I don't know. Maybe I am oversimplifying this 
for folks. California has adopted two laws requiring large 
companies to disclose their climate-related financial risks in 
greenhouse gas emissions.
    Professor Fisch, how do reporting requirements of SB 253 
and SB 261 compare with the SEC's climate rule?
    Ms. Fisch. Again, those reporting requirements are more 
demanding than the SEC standard.
    Ms. Tlaib. That is all I want to know.
    Ms. Fisch. A lot of companies that would be subject to the 
SEC rule will have to comply with the California rule whether 
or not the SEC adopted its current rule. And I should note that 
California's rule extends to private companies as well, so what 
we heard earlier about how these compliance costs are going to 
drive companies into the private markets, that is not true for 
Europe, and that is not true for California.
    Ms. Tlaib. I know that Reuters reported that roughly 5,000 
companies will have to comply with SB 253, while approximately 
10,000 companies will be subject to SB 261. Another analyst 
found that 73 percent of Fortune 1000 companies will be covered 
by both laws. Is that correct?
    Ms. Fisch. I believe that is right, yes.
    Ms. Tlaib. Thank you. I yield back.
    Mr. Meuser. The gentlelady yields back. The gentleman from 
South Carolina, Mr. Norman, is now recognized for 5 minutes.
    Mr. Norman. Thank you to the panelists for being here 
today. Ms. Fisch, let me get back to what Congressman Steil 
mentioned about what is material and what is not. In one of 
the, I guess, footnotes in this 886-page rule are the words, 
``severe weather events and other natural conditions.'' Is that 
a material risk?
    Ms. Fisch. I think the qualifier of, ``severe,'' is a 
pretty clear indicator that the SEC intends to limit this to 
material risks.
    Mr. Norman. So, it is material?
    Ms. Fisch. Yes.
    Mr. Norman. Okay. If I, on my statement, put that these are 
my insurance costs for hurricane risk, for flooding risk, and 
let that line item go, would that satisfy the SEC?
    Ms. Fisch. I am not sure I follow the question.
    Mr. Norman. So, in trying to comply with this rule, would 
the SEC take the statement to answer that particular footnote, 
the cost to my company is the insurance that I buy that the 
stockholders ultimately pay?
    Ms. Fisch. I don't think the SEC's requirement is even that 
demanding. I think what the SEC is saying is if you suffer a 
hurricane or an earthquake and your building falls down, you 
have to disclose that cost, companies engaged in a high degree 
of planning, insurance, and so forth, and that is required by 
the SEC rule.
    Mr. Norman. I get all that, but it wouldn't take more than 
one sentence, ``this is my insurance cost, this covers the risk 
that you are talking about.'' Do we have to include forest 
fires?
    Ms. Fisch. I think the point of severe weather or other 
natural conditions is so that companies wouldn't have to parse 
that line drawing, is a forest fire a weather event or is it 
some other severe condition. I don't know if that is true for 
earthquakes. I don't know if that is true for tornadoes and so 
forth. I guess the SEC is just trying to simplify that decision 
for companies.
    Mr. Norman. They haven't simplified it. That is why I said, 
``nebulous.'' How do you define that? How do you answer what 
the SEC wants? I will just answer it in my company. This is my 
cost, insurance costs, yes or no, and I think that would make 
sense. Are you tenured?
    Ms. Fisch. Yes.
    Mr. Norman. Okay. Mr. Wright, are you tenured?
    Mr. White. I am not.
    Mr. Wright. I am not.
    Mr. White. Oh, go ahead.
    Mr. Wright. Oh.
    Mr. Norman. No. Mr. Wright.
    Mr. White. I'm sorry.
    Mr. Wright. I am not.
    Mr. Norman. What is the difference in your line of work and 
in Dr. Fisch's?
    Mr. Wright. It is just a different world. I am in the 
commercial space, she is in the academic space, and----
    Mr. Norman. In the academic space, your tenure relies on 
performance. For Liberty Energy, you are on a different set of 
scales and you look at it differently. In your opinion, if I 
ask you to have to answer the severity of weather events and 
trying to describe it, what would you put?
    Mr. Wright. What would I prefer? It would have been nice if 
they would spell out what other physical events are.
    Mr. Norman. It is nebulous, and I don't know how you answer 
that. We major in the minor up here, and it is political 
science up here with my good friends on the left. The diatribe 
that you heard about from Mr. Horsford, we actually agree. I am 
in the housing business. Prices are way up. Now, his answer is 
higher taxes and more regulations. My answer is maybe start 
drilling and maybe buying oil and gas from America instead of 
foreign countries that don't like us, maybe cut regulations, 
maybe cut the cost of the illegal immigration that is coming in 
all over this country, and the $4,000 we are giving each one of 
them, and a driver's license and a phone. Maybe, that would cut 
the cost instead of higher taxes and what is happening to this 
country.
    I admire your courage when you did not raise your hand 
about, do you believe in climate change? That is a totally 
backward question, and I will let you further respond to that. 
I know you were asked about that.
    Mr. Wright. Yes. Just the expression implies faith. Climate 
change isn't religion. I have written multiple books showing 
the data about climate change. So to me, climate change is a 
physical phenomenon we should seek to understand with the real 
data, not the sensationalized data, and when we show data, we 
show datasets from the start to the end. We don't cherry-pick. 
We don't look at it. It is a real thing. It is a global 
phenomenon, but a sober understanding of it is just critical. 
And emissions are the same thing, too. What is the best way to 
reduce greenhouse gas emissions? Ultimately, it is just going 
to be technology. The biggest driver of U.S.-reduced greenhouse 
gas emissions has been natural gas displacing coal.
    Mr. Norman. Are we able to control hurricanes and 
earthquakes?
    Mr. Wright. No.
    Mr. Norman. So, we can't control that, and to say 
otherwise, the facts don't bear that out. Thank you so much.
    Mr. Wright. Thank you, Congressman.
    Mr. Meuser. The gentleman yields back. I now recognize 
myself for 5 minutes.
    Mr. Wright, I like what you just said at the end: 
Technology is the answer here. I think we are all 
conservationists. Heck, I would characterize myself as an 
environmentalist at this point. That is kind of your business, 
clean energy, right? You don't come in with all your equipment 
and your technology and all your R&D investment. It is good 
business for you. It is good business for those with whom you 
are doing business. It is good business for my former company. 
Now, the light is shut off when you come in, and employees like 
it.
    It is a social trend maybe to my colleagues here in the 
House, and certainly the regulators. The private sector is 
minimizing carbon emissions far more without the regulatory 
burdens--far more than the regulators or this Congress would 
do. I will ask you, since that is your business, how much of 
your R&D expense goes into minimizing carbon emissions?
    Mr. Wright. I would say quite a bit. We have over 2 million 
horsepower of equipment. To get oil and gas from underground, 
it takes energy to push it down, so typically, large industrial 
machinery is powered by diesel. That is the dominant industrial 
fuel around the world, and we are moving that to a new 
generation of equipment that burns natural gas.
    Mr. Meuser. Yes.
    Mr. Wright. And not just natural gas, but at the highest 
thermal efficiency possible, to use the----
    Mr. Meuser. Has the SEC, the regulators come to you and 
said, hey, do you have any ideas on some of the best rules that 
we should be implementing here?
    Mr. Wright. No.
    Mr. Meuser. And do you think the same regulators that want 
to attack you and attack our domestic energy industry--let's 
just face it, they literally choose Venezuela over my home 
State of Pennsylvania for natural gas. Do you think some of 
them use electricity, oil, or gasoline on occasion?
    Mr. Wright. Quite likely.
    Mr. Meuser. Yes, probably. Here and there, I am sure, and 
far less than us, of course. The rule is the rule, but we are 
okay to have complaints about it or issues about it, or you 
always want to make a plan better. But it is targeted to who I 
hear back from in the real world, who I talk to in industry 
about dealing with complying with this plethora of rules coming 
out of the SEC. The real problems are in the energy industry, 
which you are used to, because you are just under regular 
assault. Being a USA flagship energy industry makes you a 
terrible person, and the farmers are the ones being concerned 
here. And by the way, where is inflation hitting most? Energy 
and groceries.
    So, isn't this wonderful that we are dealing with something 
here that is going to inflate the inflationary situation that 
my constituents deal with, particularly low-income constituents 
who can't even afford the groceries and the gasoline? I am 
going to stick with you for a moment, Mr. Wright. How damaging, 
and is there a better way we could go about some of this 
compliance, and minimizing emissions, and truly trying to work 
together to gain as much clean energy in a best transition 
manner sooner rather than later other than these rules?
    Mr. Wright. Yes, absolutely. I think there is a passion in 
the country--we have seen some of that today--and around the 
world. I say the world needs more energy, better energy, and 
the U.S. has certainly been a leader in that. Our industry is a 
leader of that. It is mostly rural people who grew up on the 
land. We want to shrink our footprint on the land. We want to 
make the air cleaner. We want to use less energy to produce 
energy and produce cheaper energy.
    Mr. Meuser. Okay.
    Mr. Wright. The thing I celebrate about the shale 
revolution the most is it lowered the cost of oil, natural gas, 
and natural gas liquids, and that makes people's lives better. 
Marketplaces drive improvement, lower costs, increased----
    Mr. Meuser. Okay. Do you think the SEC has overstepped its 
authority here with this regulation?
    Mr. Wright. I absolutely believe so.
    Mr. Meuser. Okay. We will move on to former SEC Chairman 
Roisman. What do you think? What would you have done here?
    Mr. Roisman. They didn't ask me, but if you are asking me 
now, I think that the rules in place make sense. It is a 
materiality standard. If you had concerns that it wasn't 
enough, you can update the 2010 guidance, and that would have 
been a very simple thing and probably a lot less controversial.
    Mr. Meuser. And would have been more acceptable to 
industries because God forbid this Administration do anything 
that industry and our economy actually appreciates as opposed 
to adding regulation and burdens. But do you think it will be 
more acceptable to industry?
    Mr. Roisman. I do.
    Mr. Meuser. Okay. My time has expired. The gentleman from 
New York, Mr. Garbarino, is now recognized for 5 minutes.
    Mr. Garbarino. Thank you, Mr. Chairman. And thank you to 
all of the witnesses for being here today. In a challenging 
global economy, the strength of our capital markets is vital to 
long-term economic growth. However, rising costs and increased 
regulatory burdens prevent some businesses from entering our 
public markets. The SEC's newly-finalized climate rule would 
just pile on to the rising costs associated with a company 
going and remaining public. The SEC estimates that the rule 
will increase the typical cost of being a public company by 21 
percent. This doesn't include the indirect costs associated 
with the rules such as loss management time, board distraction, 
and changes in company operations.
    Professor White, would you explain what impact such a 
sudden, significant increase in compliance costs will have on 
public companies?
    Mr. White. Yes. For the companies that are already public, 
if they spend more time meeting compliance rather than focusing 
on the growth of their business, that can destroy value for 
their investors. For companies that are thinking about going 
public, I would expect it will limit those companies from doing 
so, which is going to trickle down and hurt investors because 
they have fewer opportunities to diversify their portfolio. 
They have fewer investments that they can make, which can 
damage their returns. It also harms market liquidity. So, it 
can actually hurt all investors.
    Mr. Garbarino. That actually was my next question, what was 
it going to do to private companies thinking about going 
public. It would probably keep most of them going public, yes. 
So, what impact will these costs both for private and public 
companies have on American competitiveness? Would you expect 
companies to begin to increase their activities in 
jurisdictions where similar costs are not required?
    Mr. White. Yes. You think about going public and where to 
operate both in the U.S. and globally. Now, we compete against 
companies all over the world, so if a jurisdiction offers you 
better terms in terms of being public, lower costs, but you 
still get access to investor capital and liquid markets, then 
you would migrate to those jurisdictions, which could end up 
having both tax revenue leave the United States as well as 
human capital and really high-skilled technologies.
    Mr. Garbarino. So at a time when we are trying to bring 
manufacturing, all sorts of jobs back into the country, a lot 
of investment has gone into that. This rule created by the SEC, 
not Congress, outside of the SEC's jurisdiction, could end up 
causing us to lose jobs and capital to other places across the 
world?
    Mr. White. Yes, that is the incentive.
    Mr. Garbarino. Yes. Staying on the subject of increased 
costs, Mr. Wright, you mentioned in your testimony how Liberty 
is subject to the climate rule and faces compliance costs to 
meet the rule's reporting timelines. You go on to mention how 
the rule will make energy production more expensive by driving 
up compliance costs and making conditions more difficult for 
investment. Would you summarize what new costs your company 
must incur to successfully comply with the rule, and 
specifically, how these costs will be more problematic for 
smaller public companies than larger public companies?
    Mr. Wright. Yes. And, of course, we don't know the number 
today, but we look at it as similar to Sarbanes-Oxley. We 
probably spend somewhere between a half million and a million 
dollars in third-party costs to comply with Sarbanes-Oxley.
    Mr. Garbarino. What was that number?
    Mr. Wright. Somewhere between a half-million and a million 
dollars.
    Mr. Garbarino. A million dollars.
    Mr. Wright. And our expectation was this would be similar. 
My fear is it would be worse because we are counting something 
that is ultimately not precisely countable, so where do we draw 
that line of a good enough guesstimate? One of my bigger 
problems is just the uncertainty around the ability to even 
deliver these numbers, where we drive greenhouse gas emissions 
by innovations, by equipment. We talk about this stuff all the 
time. Our big-picture progress in greenhouse gas emissions is 
pretty well-known to investors, and employees in our company. 
This distracts from that effort, and we have to count something 
that is not perfectly quantifiable. That is unsettling to me.
    Mr. Garbarino. I actually was at the U.N. Conference of the 
Parties (COP) this year, and oil and gas companies spent a lot 
of time there talking about what they have already done to 
lower greenhouse emissions. So, us doing something in that 
regulatory environment or putting another regulatory burden on 
these companies that would actually take away from that, I 
think is just a terrible idea and actually is counteractive to 
what the SEC is trying to do here but doesn't have the 
authority to do it. We have seen plenty of leadership from U.S. 
companies, especially gas and oil companies to do right by 
greenhouse gas emissions.
    I am running out of time, so I want to thank you for all 
for your answers, and I yield back.
    Mr. Fitzgerald. [presiding]. I am now going to recognize 
myself for 5 minutes.
    Among the specific requirements in the rule, the required 
disclosures for greenhouse gas emissions data stand out as 
especially burdensome. These reporting requirements do not 
track with what is currently tracked by companies and when that 
information can be reliably reported. The exemption for smaller 
reporting companies (SRCs) is far too narrow, and this rule 
will impact many smaller- and medium-sized manufacturers, which 
make up the substantial share of businesses, certainly in my 
Fifth District. And as you know, even with a limited safe 
harbor in place, the SEC acknowledges that the climate rule 
will expose companies to increased litigation risk. I am 
concerned that the risk will prevent companies from going or 
remaining public.
    Mr. Stebbins, would you explain why the climate rule's 
limited safe harbor is not enough to protect companies against 
increased litigation risks?
    Mr. Stebbins. Thank you. The safe harbor only covers 
certain select disclosures, and it doesn't cover historical 
facts, and those disclosures are primarily going to be 
comprised of historical facts. And a leading law firm recently 
wrote a memo about the adopting release, and they concluded, or 
they advised, that you should not give too much credence to 
that safe harbor because of the fact that, because it is 
typically going to be used by historical facts that is going to 
be your disclosure. So they advised, don't give it too much 
credence, and I agree with that advice. I think that is sound.
    Mr. Fitzgerald. Very good. Proponents of the final rule 
will often argue that climate-related disclosures are necessary 
in response to the demands of investors. However, I am 
concerned that the SEC has finalized the rule not to the 
benefit of investors, but instead to placate activists who 
consider climate-related objectives important. Rather than 
focusing on the financial interests of the shareholders, this 
idea of stakeholder capitalism that some companies have 
embraced comes off as more of a public relations stunt to evade 
the actual accountability. Shareholder rights are well-defined, 
but if a company has an obligation to a nebulous group of 
stakeholders, it is ultimately not accountable to anyone.
    Mr. Roisman, would you explain why these activists may be 
better understood as stakeholders and not as investors?
    Mr. Roisman. When people talk about stakeholders, as you 
mentioned, it is not just stockholders. It can be your 
customers. It can be your employees. It can be the community. 
It can be the government. It is not just the people who own 
your company. And one of the concerns that some of the 
dissenting Commissioners had about this was that these rules 
may be crafted more to satisfy stakeholders than the Main 
Street investor than, historically, the SEC thought.
    Mr. Fitzgerald. Very good. Chairman Gensler often kind of 
hides behind this argument that many rulemakings are authorized 
by Congress, and has said that as he has testified in front of 
Congress, believe it or not. However, a study that analyzed the 
SEC's rulemaking agenda under his tenure found that 39 rule 
proposals, or approximately 80 percent, were not required by 
congressional statute. Many of the proposals overlap and could 
have unintended consequences that risk undermining our capital 
markets. Probably a good example is the proposals to change 
beneficial ownership and securities-based swaps and their 
disclosures and how that may impair liquidity. This could lead 
to harmful activities, such as front-running or diminished 
corporate governance checks and balances, I guess you could 
say.
    Mr. Stebbins, can you discuss the authority the SEC is 
relying on for the climate rule and your thoughts on whether 
they even have this authority in the first place?
    Mr. Stebbins. They are relying on their general investor 
protection authority. There is no specific authority for this 
rule. They clearly have the authority to pass laws related to 
the environment because they have them already based on the 
investor protection authorization you could regulate 
environmental risks. We still make that disclosure already. It 
is already required. So all material environmental risks are 
already required to be disclosed. The question is, does that 
authority let you do this law? I don't think it is going to be 
held up. I think the Supreme Court or the Eighth Circuit is 
likely to find it to be a violation of the major questions 
doctrine, but that is for the Court to decide, not for me.
    Mr. Fitzgerald. Very good. My time has expired. We are now 
going to move on to the gentlewoman from California, Mrs. Kim.
    Mrs. Kim. Thank you, Mr. Chairman. And I want to thank our 
witnesses for being with us today for long hours.
    I want to talk about my concern that regulations proposed 
by SEC Chair Gensler will increase compliance costs and 
disincentivize private companies from going public. According 
to a recent CNN article, there were 7,300 publicly-traded 
companies in the United States in 1996, and today, there are 
4,300. That is a significant decrease. I am troubled by the 
SEC's own estimates that this rule we are discussing today will 
increase the costs of being a public company by 21 percent.
    Mr. Roisman, in your testimony you discussed the 
complexities of considering foreign and State regulatory 
regimes on top of the SEC's proposal. Unfortunately, my home 
State of California is the only State mandating disclosure of 
Scope 3 emissions. So, can you elaborate on the difficulties 
and the costs that public companies will have to bear to comply 
with different rules from multiple jurisdictions?
    Mr. Roisman. Sure. I think the SEC makes it clear that, 
undoubtably, costs will rise as a result of this. Even if 
companies are tracking this information right now, it is very 
different to track and collect it to be put into an SEC filing 
which is subject to higher litigation or, more likely, 
litigation. In terms of Scope 3 or Scope 2 even, there are, 
essentially, provisions within the rule that say you need to 
take into account if you are subject to material sort of 
regulatory risk because you are disclosing information due to a 
California law or European law, and you are going to have to 
take that into account in making a materiality assessment.
    I think some of the concerns people are saying, and I think 
Mr. Wright did a very good job of explaining this, is that some 
of these numbers are just not easy to come up with. I am not in 
the industry, I am just a lawyer, but the level of sort of 
compliance and outside expertise that are going to be needed in 
order for me to advise clients that what they are doing is 
sufficient for being able to put the stuff into their SEC 
filings is high. And even people who are doing it right now, I 
am not sure they are ready for that.
    Mrs. Kim. Thank you. Mr. Roisman, and Mr. Stebbins, I want 
to give you both an opportunity to respond to a few arguments 
that my colleagues on the other side of the aisle have made 
throughout the hearing. Specifically, we have been hearing that 
the SEC's rule is somehow weak or preferred because the 
California and European requirements extend to Scope 3 
emissions and apply to private companies.
    First, can you remind us if California should set Federal 
securities policy? And second, could you explain what the 
difference is from a litigation risk perspective between 
complying with European disclosure requirements versus 
including climate-related information in SEC filings? Either 
one of you.
    Mr. Roisman. I will start. I think the role of the SEC or 
Congress is to set both Federal laws and Federal rules. To your 
question about, is there a difference between complying with 
State and European regulators, there is absolutely a 
difference, and especially with Europe. What people often 
forget is there is not the litigation risk for companies in 
Europe that there is in the United States for putting things in 
their filings. So, I do think companies need to stand behind 
what they say, but there is a difference between putting 
something in a voluntary report than it is into your SEC 
filings.
    Mrs. Kim. Okay. Do you want to add to that, Mr. Stebbins, 
or should we move on?
    Mr. Stebbins. I think we should move on.
    Mrs. Kim. Okay. Thank you. I want to talk about my 
legislation, the REG Act. Considering that the SEC, under 
Chairman Gensler, is failing to assess the aggregate cost of 
regulations in a proper way, I introduced H.R. 7030, the REG 
Act, to require the SEC to consider the cumulative effects of 
every rulemaking.
    I want to ask this question to Professor White. The SEC's 
cost-benefit analysis notably fails to account for the ways in 
which rules interconnect. It also fails to assess the aggregate 
impacts of each new rule with other rules with which companies 
are required to comply. So, would you explain why it is 
concerning that the SEC only considers the cost of the climate 
rule in isolation?
    Mr. White. Yes. Thank you for the question. I think it is 
important to realize that none of these regulations or rules 
operate in a vacuum. Companies have to make many disclosures to 
their stakeholders and stockholders through their Form 10-Ks. 
And when you analyze a rule in isolation, you might be able to 
assess that through a cost-benefit analysis, which I wrote at 
the SEC when I was an economist. And when you put all those 
together, if you are looking at 2024, Chair Gensler said there 
were many more disclosure rules coming down the line, human 
capital----
    Mr. Fitzgerald. The gentlewoman's time has expired.
    Mr. White. Yes.
    Mrs. Kim. Thank you very much. I yield back.
    Mr. Fitzgerald. The gentlewoman yields back. We will now 
recognize the gentleman from Nebraska, Mr. Flood, for 5 
minutes.
    Mr. Flood. Thank you, Mr. Chairman. Here we are yet again 
dealing with Chair Gensler's, ``fountain of bad ideas.'' That 
is not my term. I heard that from one of our most respected 
senior members on this committee. But let's take a look at the 
SEC's climate rule's overall purpose. Why did it even come into 
being in the first place? Chair Gensler argues that the rule 
simply measures a risk that was already in the market. In his 
statement following the issuance of the final rule, he said 
that this rule was simply an extension of the SEC's commitment 
to, ``complete and truthful disclosure,'' regardless of the 
type of risk.
    However, when you take a step back and you look at the 
lead-up to the SEC's climate rule, it is apparent that this 
rule is not about accurately capturing one more material risk 
for public companies. Proponents of the rule express as much 
very openly. They say that the rule will help support, ``the 
goal of net zeros greenhouse gas (GHG) emissions by 2050 or 
sooner,'' or to, ``drive aggressive reductions,'' in greenhouse 
gas emissions.'' You can't have it both ways.
    You will notice that those particular goals aren't about 
disclosure for investors. They are not about accurately 
capturing risk associated with extreme weather events or 
responding to investor demand. Instead, they say the quiet part 
out loud. This rule is about pursuing climate goals, not well-
tailored disclosures, period. This makes sense when viewed in 
the larger political context. President Biden has repeatedly 
vowed to use any power he has to combat climate change wherever 
possible, and this rulemaking is yet another step in that 
direction.
    Mr. Wright, do you believe the SEC's climate rule is 
fundamentally about promising material disclosure or reducing 
emissions?
    Mr. Wright. No, I don't believe it is about either. I don't 
think it is about material disclosure, again, because we can't 
count those numbers. The basic facts of our emissions, their 
investors can assess that many other ways, but I think the 
impact of it, of course, will be increased greenhouse gas 
emissions by moving production from here to there. So, I don't 
think it could be truly designed to reduce emissions either.
    Mr. Flood. Point well taken. Following up on that, 
something in your testimony that I have already found 
interesting today is, if you take for granted that the SEC 
views climate as simply a risk like any other, then why does 
this rule include so many detailed reporting requirements that 
other, clearly material risks do not?
    Mr. Wright. I don't know. It is hard to explain the nature 
of this rule, and if it was just material--look, I have to 
disclose anything that is a material risk to my business, that 
is what I do. To mention extreme weather, that is a real risk. 
That has been a risk forever, and it is not on an upward trend. 
So, I don't know the new information there.
    And the thing that maybe concerns me the most is there is 
materiality in there, but it is sort of a fake for the oil and 
gas industry, because if you face transition risk, which means 
if the government makes it harder for our customers to produce 
oil and gas in the United States, that is a threat to our 
industry. That is not a climate risk.
    Mr. Flood. That is material then, yes.
    Mr. Wright. That is a policy risk, that is material, but I 
don't know how to discuss or project a risk. I don't know what 
future rules are going to do.
    Mr. Flood. SEC Commissioner Peirce mentioned that no other 
type of risk requires, ``prescriptive forward-looking 
disclosure of the risks impact on a company's business 
strategy.'' SEC Commissioner Uyeda pointed out the specific 
requirements related to disclosing details around severe 
weather losses and beyond what a company would be required to 
do for any other type of risk. All that is to say that the 
SEC's climate rule does not merely identify an existing risk in 
the marketplace. It requires disclosures that elevate climate 
and emissions information above other requirements. If I were a 
public company, the number-one material risk if we are going to 
put everything under the sun would be the fact that this 
country is $34 trillion dollars in debt. That is material. That 
is where the SEC Chair should start.
    Following up, Mr. Wright, what does this newfound focus on 
climate from the SEC mean for your company and others in the 
energy business?
    Mr. Wright. Increased complexity, increased cost, and 
increased risk, and, therefore, fewer new companies, less new 
capital on the margin, less new activity, and less new 
production in the country.
    Mr. Flood. Well said. With that, Mr. Chairman, I yield 
back.
    Mr. Fitzgerald. The gentleman yields back. I now recognize 
the gentleman from Iowa, Mr. Nunn, for 5 minutes.
    Mr. Nunn. Thank you, Mr. Chairman, and thank you to our 
witnesses for joining us here today.
    Under SEC Chairman Gensler's leadership, in Iowa, my home 
State, small and mid-sized businesses are being crushed by both 
ill-thought-out rules and increased compliance costs. This pro-
Green New Deal and anti-job-making rule for the SEC is just the 
latest offense in a long line of decisions by unelected D.C. 
bureaucrats forcing businesses to comply with unreasonable, and 
unnecessary, in my opinion, bureaucratic red tape.
    I would like to be able to see all the witnesses there and 
just remind them that this 5,000 pages in front of me is just 
the start of what the SEC has done to hometown businesses and 
farmers in places like Iowa. It represents all the new 
financial rules forced on Iowa companies, and this is just in 
the last year alone, and with this new rule, we are adding 886 
additional pages to the stack. This does not include the 
existing rules or regulations. By anyone's measure, this is 
unconscionable. This is far more than what anyone would expect 
a small town or hometown business to do, and, quite simply, it 
is outrageous. I am perplexed how this Administration thinks 
that businesses can thrive or even survive in this slosh and 
deluge of red tape and the environment.
    With that, Professor White, I would like to begin on the 
rulemaking and the ripple-on effects of this for capital 
formation. Conservative estimates suggest that an increase in 
compliance costs from this rule that we are discussing today 
alone will result in a 21-percent increase in how businesses 
back home attempt to function. Do you think this will impact 
their ability to stay open?
    Mr. White. Yes.
    Mr. Nunn. At the very least, will it prevent them from 
going public?
    Mr. White. For sure.
    Mr. Nunn. Could you talk to us a little bit about how you 
think this would impact a small or mid-sized company back in 
Des Moines, which is going to be treated the same as a Wall 
Street Titan?
    Mr. White. Small and mid-sized companies that are not 
exempt from the provisions in this rule would have an increase 
in compliance costs. It is much more difficult for them to 
amortize those costs over their assets, whereas a very large 
company, even though this is a real cost, has more assets and 
more ability to pass that on to customers.
    Mr. Nunn. Absolutely. More compliance officers, a bigger 
legal team, a bigger apparatus to do this. I am just from a 
little farm State in Iowa, but what we grow well, we grow 
agriculture and we grow wrestlers. And I can't imagine putting 
160-pound high school wrestler in the same weight class as a 
285-pound University of Iowa or Iowa State wrestler. The 
regulations in this environment need to follow the same aspect 
that we need to be able to treat different as different for a 
good reason and allow each to thrive in their own in this case, 
weight class or category to be successful.
    Mr. Wright, as we all know, the SEC's mission is to 
increase the ability for Main Street to have access to cash, 
this keeps them going. Will this rule by Chairman Gensler help 
with this goal to have increased access to capital?
    Mr. Wright. No.
    Mr. Nunn. In fact, I would suggest that this is actually 
going to put America's markets at a disadvantage. Would you 
agree?
    Mr. Wright. I agree.
    Mr. Nunn. Is there a solution that you would offer that 
could move us in the right direction?
    Mr. Wright. A financial risk regulator should not be 
getting into climate policy and the complexities of greenhouse 
gas emissions. I write materials every year trying to have a 
more open, thoughtful dialogue about climate policy and energy 
policy, and maybe we should have a little more of that.
    Mr. Nunn. I fully agree with you, and, Mr. Chairman, this 
is one of the reasons we will be writing a letter directly to 
the SEC on this. We would love your analysis on this to really 
shape this in the right place.
    Mr. Stebbins, to switch gears, I am increasingly concerned 
about the SEC's disregard for cost-benefit analysis and the 
lack of flexibility in its rulemaking. This is evident in the 
large number of companies that are suing the SEC now just to 
get clarity, because they can't get through this and get any 
consistency in what is coming out of the SEC. For example, the 
SEC's stock buyback rule was recently vacated because the SEC 
failed to complete a proper analysis and provide justification 
for the rules. Do you see the climate rule facing a similar 
legal challenge?
    Mr. Stebbins. I see the climate rule being challenged on 
three grounds: first, the major questions doctrine, which I 
just discussed; second, the Administrative Procedure Act (APA), 
whether there is, what you talked about in the share repurchase 
case--in the Fifth Circuit, it was struck down under the APA by 
not having an adequate cost-benefit analysis and not showing 
that a real problem existed, so that will be a challenge. And 
the third challenge will be the First Amendment. Those will be 
the three challenges.
    Mr. Nunn. I think it is important today that we should not 
be in a situation where only the big guys get to sue and get 
clarity. The impact is a trickle-down all the way down to every 
farm and business in Iowa. And with that, Mr. Chairman, I thank 
the committee. And I yield back my time.
    Mr. Fitzgerald. The gentleman yields back. I will now 
recognize the gentlewoman from Texas, Ms. De La Cruz, for 5 
minutes.
    Ms. De La Cruz. Thank you, Mr. Chairman, for holding this 
hearing, and thank you to the witnesses for being here to talk 
about rules that just go above and beyond what not only the 
companies have to deal with, but what the everyday investor has 
to deal with. In fact, my colleague, Mr. Nunn, really made an 
impact here when he showed us the amount of paperwork that a 
company, a growing company is going to have to deal with when 
they are looking at opportunities and growth. And let's just 
talk about for their own companies, but what does that mean for 
the everyday community member's economic impact, but let's just 
talk about the investor.
    I have my Series 6 and 63 licenses. I dealt with 
investments. I understand giving the common everyday person 
disclosures. Already, when we hand disclosures right now to 
investors, we hand them a packet that feels overwhelming to 
them, in fact, so much so that when I started in the 118th 
Congress, we actually passed legislation right here in this 
committee that would stop the paper version from coming to 
people's households because it was so much paperwork, and we 
made it into an electronic format so that it would go straight 
to their email.
    So, Mr. Roisman, are we really having a positive impact on 
our investors where they feel informed, or will they feel 
overwhelmed by not only receiving the disclosures that they 
receive right now but the disclosures that they will receive in 
addition because of this rule?
    Mr. Roisman. Thank you for that question. I think there 
will certainly be some investors who think this is important, 
and there are going to be investors who don't find this 
important. I think the concern you raised is one that, frankly, 
Commissioner Peirce raised as well in her dissent, which is 
entitled, ``green regs and spam,'' and she was concerned about 
spamming investors with more and more information. And I think 
that is sort of the line people always are concerned about is 
you want to provide information that is decision-useful for 
investors, but you don't want to overwhelm them. And I think 
that is a constant balance that every company is trying to 
meet.
    Ms. De La Cruz. Thank you, and I think what you said is 
very impactful, it is overwhelming to the average investor. So, 
what may be important or informative to a small group, what 
does the average investor feel when they receive it? And I 
would say quite simply, being in the business and dealing with 
the everyday investor, this is just simply overwhelming. But 
when we talk about individuals' and investors' economic impact, 
what about jobs? How will this ultimately affect job 
opportunities for the everyday American when it comes to 
companies having to deal with this climate rule? Would anybody 
like to take that on the----
    Mr. Roisman. I feel like this is probably Mr. White's.
    Ms. De La Cruz. Mr. White? Yes.
    Mr. White. Sure. I can jump in here. The rule is estimated 
to raise costs by 20 percent, and there are many companies that 
aren't operating at 20-percent margins. So, some of those 
companies that have to take this cost and put it into their 
business model are going to be able to hire less on the margin. 
It might benefit jobs for accountants who work in this space. 
But as it trickles down towards smaller companies and has an 
impact on them going public or staying public, there is lots of 
academic evidence showing that IPOs create jobs, so to the 
extent that you disincentivize that, it would reduce 
employment.
    Ms. De La Cruz. As a small business owner myself, I 
understand in that planning for the future, we look at changes, 
whether it is growth or it is cost. And as a small business 
owner myself, I will look at the cost of doing business in 
increments of 2 to 5 percent that have a significant impact on 
the everyday small business owner or corporation, 3 to 5 
percent. So when you tell a business owner like myself that you 
are estimating a public company will have a roughly 20-percent 
change, this is an enormous change that the company has to 
absorb, and will not only affect the way they do business, but 
will affect their investors and their employees as well.
    Mr. Fitzgerald. The gentlewoman's time has expired.
    Ms. De La Cruz. Thank you.
    Mr. Fitzgerald. I am sure that you can seek those answers. 
I am next going to recognize the gentleman from Tennessee, Mr. 
Ogles, for 5 minutes.
    Mr. Ogles. Thank you, Mr. Chairman. Witnesses, thank you 
for being here. We are coming to the end.
    Mr. Chairman, if I may, I just want to point out that 
Professor White is from the good State of Tennessee, Vanderbilt 
University. I was actually on the Vanderbilt campus on Friday. 
So, go 'Dores, and thank you for being here.
    Mr. White. Thank you.
    Mr. Ogles. But welcome again. Last month, the committee 
traveled to my great State, where Representative Rose and I 
hosted a field hearing on this very same topic, where we heard 
then, just as we have heard today, about how the SEC's climate-
related disclosure rules play to the tune of the 
Administration's obsession with their climate change religion. 
And I think you spoke to that, Mr. Wright, that you don't 
ascribe to this religion, nor do I. The rule is illegal and 
unconstitutional.
    By peppering investors with irrelevant information, as we 
see by this stack of paper behind me, it will make them less 
informed about what is important and will divert companies from 
their core purpose of maximizing shareholder wealth and 
creating products that increase everyone's standard of living.
    Mr. Chairman, I ask unanimous consent to enter into the 
record a letter by Advancing American Freedom, which is signed 
by more than 60 conservative groups, encouraging Congress to 
end the SEC's climate disclosure rule. The SEC's job is to 
regulate securities, stocks and bonds, not to orchestrate a 
destructive climate agenda behind the backs of Americans and 
duly elected representatives----
    Mr. Fitzgerald. Without objection, it is so ordered.
    Mr. Ogles. And I would say, Mr. Chairman, what we have seen 
with many of the agencies, including the SEC, is they are 
creating laws by way of rule, and enough is enough. We have to 
rein this in, and before us, we have a panel of experts who 
have spoken to this.
    Professor White, again, thank you for being here, go 
'Dores. We have heard today about how the climate-related 
disclosure rule will affect capital formation. Can you discuss 
specifically both the long-term impact and the short-term 
impact as it relates to capital?
    Mr. White. Yes. In terms of the short-term impact and 
capital formation, if it makes it more expensive for companies 
to operate in terms of their compliance costs, then that is 
going to increase their cost of capital potentially, it is 
going to rely upon the tradeoff between the benefits and those 
costs. As you look to more of a longer-term scenario, even 
though the rule exempts some particular small companies, 
eventually those small companies grow into medium-sized and 
larger-sized companies that have to comply. So, I would expect 
a negative capital formation impact both in the near and the 
long term.
    Mr. Ogles. Yes, sir. And really briefly, Mr. White, you 
have a B.S. in finance, a Ph.D., and an M.B.A. in finance, and 
you are a professor of finance, and a former Economist for the 
U.S. Securities and Exchange Commission, so I think it is fair 
to say you know numbers.
    Mr. White. Yes.
    Mr. Ogles. And you teach students?
    Mr. White. I do.
    Mr. Ogles. If you were teaching a course, and you assigned 
a project, would the cost-benefit analysis done by the SEC meet 
your standards?
    Mr. White. I think that the SEC has likely underestimated 
the costs. They are looking more at the direct cost of 
compliance, and they are also relying upon estimates of 
assessing some of these disclosures, some of which are 
uncertain, inherently. So, I know I would think that it would 
be below the standard for accurately assessing the impact.
    Mr. Ogles. Yes, sir. And Mr. Chairman, votes have been 
called, so I am about to yield back. But I just would like to 
say that perhaps Gary Gensler should take one of your courses 
before he does another cost-benefit analysis. Thank you, Mr. 
Chairman. I yield back.
    Mr. Fitzgerald. The gentleman yields back. I would like to 
thank our witnesses for their testimony today.
    The Chair notes that some Members may have additional 
questions for this panel, which they may wish to submit in 
writing. Without objection, the hearing record will remain open 
for 5 legislative days for Members to submit written questions 
to these witnesses and to place their responses in the record. 
Also, without objection, Members will have 5 legislative days 
to submit extraneous materials to the Chair for inclusion in 
the record.
    This hearing is adjourned.
    [Whereupon, at 1:45 p.m., the hearing was adjourned.]

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                             April 10, 2024
                             
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