SEC’s Mission is to Regulate the Securities Markets

During the Obama administration, the Securities and Exchange Commission (SEC) published guidance clarifying how publicly traded companies should apply existing SEC disclosure rules to the risk climate change development may pose to their business.  Now, Biden Administration SEC has said that climate-related disclosures are a top priority; thus, the agency solicited comments on how public companies should disclose more information about threats linked to climate change.

AXPC companies strongly support transparency in financial disclosures so that our stakeholders and shareholders have the best information on which to evaluate our companies.  However, SEC-mandated climate disclosures raise a number of potential concerns and potentially larger implications and negative consequences, such as: job losses that harm the families, towns, and economies that depend on these jobs, as well as a greater reliance on foreign oil from unstable regimes with lower environmental standards than we have here in the United States.

The SEC’s mission is to regulate the securities markets – not use financial regulatory authority as a proxy for addressing climate change.  In the US, the SEC has Congressional authority to require companies to report information that is “material” – or fact-sensitive, based on the specific characteristics of an economic sector, and relative to the specific company so investors can make decisions. Our companies take this requirement very seriously, and often voluntarily report far beyond what is material because of the broad interest in the energy industry. Climate risks vary from sector to sector, so “material” information also varies.

Expanding mandatory reporting beyond “materiality” is outside the mission of the SEC and the authorities it has been granted by Congress.  The SEC should take a principles-based approach to any actions it may take, and in keeping with the Commission’s historical approach to substantive disclosures.

Another concern with the SEC developing new climate-related disclosures is liability.  Companies’ (or other reporting entities) good-faith efforts should not be subject to liability for forward leaning statements based on estimated scenarios. Rather the requirement should be to furnish, not file, climate disclosures, as sufficient methodologies to the degree required for filing do not exist yet to vet climate data.

Additionally, the SEC should not use these requirements to shape the investment sector toward, or against, any particular policies – new climate-related disclosures should not  discriminate against any economic sector.   In the case of energy production, these rules could arbitrarily channel more capital toward one industry over another, and we firmly believe that the federal government should not be in the business of picking winners and losers – in energy or in any economic sector.  Consumer choice should drive the free market.

As one of the many economic sectors affected by SEC climate disclosures, AXPC provided detailed comments to the agency, explaining that our industry is committed to collaboration, engagement, and progress on ESG reporting, as evident by the “ESG Metrics Framework” we released earlier this year [link].  Oil and gas companies routinely report on ESG performance, demonstrating their accountability for addressing challenges and risks affecting the industry, the environment, and our commitment to sustainable operations.

In addition to the actions the SEC has taken on climate disclosures, we are also concerned about H.R. 1187, the ESG Disclosure Simplification Act of 2021, which confuses rather than clarifies SEC’s long-standing definition of materiality.

Rep. Byron Donalds (R-FL) said that the Bill “is inconsistent with the mission of the SEC; it does not protect investors, it is not fair and it is not efficient. It is nothing more than a government run litmus test that politicizes the SEC and contradicts the mission of the SEC. Mandating public companies to disclose details that are not financially relevant, or material is an abuse of power.”

We believe in being transparent and responsive to stakeholders, investors, and the public – and, we believe that the SEC should focus on identifying any material gaps that may exist in disclosures and procedures already in force, rather than establishing an entirely new disclosure framework that would be unnecessary, outside the bounds of the Agency’s authority granted by Congress, and could cause liability concerns for public companies across the American economy.

About the American Exploration and Production Council:
AXPC is a national trade association representing the largest independent oil and natural gas exploration and production companies in the United States. We lead the world in the cleanest and safest onshore production of oil and gas, while supporting millions of Americans in high-paying jobs and investing a wealth of resources in our communities. Learn more at


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