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How the SEC Can Fight Climate Change

Sean McElwee

Several corporations sit on the boards of powerful business and trade organizations that take positions contrary to  the companies’ purported stance on climate change, finds a new Union of Concerned Scientists report. They are able to do this without public accountability because, currently, trade associations aren’t required to disclose their funders and corporations are not required to disclose their political spending. The report’s author makes clear that in the crucial arena of climate change policy, “the public is still in the dark when it comes to how companies and their trade associations influence government decisions.”

There is a simple way to start to fix this lack of transparency and accountability. The U.S. Securities and Exchanges Commission (SEC) should proceed with its rule making that would require companies to disclose their political activities. While 650,000 Americans of all stripes, including leading investors, have filed a record breaking number of comments supporting this common sense rule, 29 trade groups, including the U.S. Chamber and National Association of Manufactureres, wrote to the agency opposing the proposed rule. Last month, the SEC removed consideration of the rule from its 2014 agenda.

The UCS study recommends that the SEC take action on the rule, and demonstrates why such a rule is so necessary to combat climate change. The study examines major corporations’ responses to an annual survey about their political activities and compares them to the stances of trade associations they support. The study finds that these organizations often hold extreme positions on climate change that are not consistent with the expressed preferences of the companies that fund them. It also finds that many companies did not disclose their positions on a trade association, even when publicly available information shows they are on the association’s board. Ninety-five companies reported that one or more of the trade groups they supported had a climate policy that was not consistent with their own.

As SEC Commissioner Aguilar has explained, “shareholders require uniform disclosures regarding corporate political expenditures for many reasons, including that it is impossible to have any corporate accountability or oversight without it.” A Drexel University study released last December finds that the climate denial movement consists of 91 organizations supported by 140 primarily conservative foundations but that 75% of the funds for the climate denial movement is completely untraceable. These two studies both point to the importance of a U.S. Securities and Exchanges Commission (SEC) rule to require that companies disclose their political activities.

Of the 9,136 peer-reviewed authors who published a paper about climate change between Nov. 12, 2012 through December 31, 2013 only one rejected anthropogenic global warming. The one dissenting author, Russian scientist  S. V. Avakyan, appears to be motivated by a desire to maintain Russia’s dominance as an oil and gas exporter. At this point, denying climate change is like denying the harmful effects of smoking - only someone with a commercial interest would even question the data.

Given the drastic costs to companies that could occur if the carbon bubble is popped through government action, it’s unsurprising that trade associations are lobbying heavily against regulation. It’s important to bring these trade associations out of the dark so that the public can know what companies are funding spurious climate research and policy. Without transparency there can be no accountability, and the SEC should move forward with the rulemaking to require disclosure of corporate political activities.