As if there weren't enough supply-chain hose-ups and factors increasing food prices already, the Securities and Exchange Commission is poised to impose new levels of cost and bureaucratic distraction on the nation's ag sector.
The SEC's pointy-heads seem to be oblivious to how this kind of thing has worked out elsewhere:
Echoing conflicts from Sri Lanka to Canada to the Netherlands, tensions between farmers and green-minded government policymakers are building in the United States, where producers are squaring off against a costly proposed federal mandate for greenhouse-gas reporting from corporate supply chains.
The U.S. Securities and Exchange Commission in March proposed requiring large corporations, including agribusinesses and food companies, to report greenhouse gas emissions down to the lowest rungs of their supply chains as a means of combatting climate change, which environmental campaigners contend imperils the planet and life on it.
This would be yet another instance of the big dogs at the top of the supply chain getting all up in the business of the small operations that continue to provide quality product at reasonable prices because they have time to focus on that instead of a bunch of resource-consuming record-keeping:
Reporting such indirect, “scope 3” emissions would require corporations to demand data on the use of fuel, fertilizer, pesticides, and other chemicals from small-scale farmers who say they lack the personnel and resources to comply. The challenge has been led by the powerful American Farm Bureau Federation and its state affiliates, whose representatives have met with SEC officials and organized their lobbyists in Washington.
“The farmers we represent are already heavily regulated at the state, local, and federal level but have never been subject to things concerned with Wall Street,” said Lauren Lurkins, director of environmental policy at the Illinois Farm Bureau. “Our farmers do not have a team of compliance officers or attorneys, and they don’t have a network of people to help them understand this. They really want to make sure they are growing crops and raising livestock and that [they] take care of the food supply.”
What's driving this is the ESG movement and the institutional investors who think it's the way to go:
The downstream data reporting is required, the SEC claims, to determine larger, publicly traded companies’ green score, called an ESG, or environmental, social, and governance rating. The greenhouse gas measurements would be made at least partly in accordance with a set of standards developed in 2011 by an international consortium of environmental groups and corporations.
While the SEC released its first climate-related disclosure guidance in 2010, the new requirements are driven by the “elevation of climate issues,” Erik Gerding, the SEC’s deputy director of legal and regulatory policy in its division of corporation finance, said in a May webinarput on by the Task Force on Climate-Related Financial Disclosures, an international group formed to increase reporting by companies of climate-related information.
The proposed rule is not driven by the average individual investor, but rather investment giants managing large portfolios.
“Several institutional investors who have collectively trillions of dollars and investments under management have demanded climate-related information … because of the investor assessment of how climate change poses a risk to their portfolio,” Gerding said.
Most shareholders in the U.S. prioritize traditional corporate performance over environmental and other social welfare concerns, according to a Gallup study released in February. The poll queried its Gallup Panel with $10,000 or more in equities or bonds.
In another survey, investment professionals in the National Investor Relations Institute ranked an ESG score fourth in risk to a company behind performance, crisis, and management troubles.
However, there is an encouraging amount of pushback:
Gary Gensler, the Biden-nominated chairman of the SEC and a long time progressive, said in announcing the plan that “it would provide investors with consistent, comparable, and decision-useful information for making their investment decisions.”
But the plan drew “an extraordinarily high” number of substantive comments to the agency – around 14,000 – during the 60-day requisite comment period, according to Ropes & Gray, a law firm that compiled a report on public comments submitted to the SEC on the climate disclosure proposal. Because of that, the comment period was extended an extra 30 days and closed on June 17.
Agribusiness represented 20% of the total comments received by the SEC, mostly opposing the rule. The SEC was scheduled to adopt the plan in October, but it is expected to finalize the rule later due to the volume of comments and pleas for reconsideration.
Among the comments was the promise of litigation from a group of 24 Republican state attorneys general, which cited this year’s U.S. Supreme Court decision in West Virginia v. EPA that a federal agency does not have the authority to regulate greenhouse gases.
“If the Commission insists on taking the same inappropriate course, we will be ready to act once again,” the letter stated. “We urge you to save everyone years of strife by abandoning the Proposed Rule.”
It's not just Republicans, though. At least one Democrat with his head on straight is concerned as well:
In a Senate hearing earlier this month, Gensler sought to assuage concern over the proposed rule voiced by Democrat Jon Tester, Montana’s senior senator and a lifelong rancher.
“If the public company says, ‘Hey, we need you … to tell us how much fuel you used, how much fertilizer you used, what your inputs were,’ and all that, it becomes an issue, especially for the little guy…” Tester said.
Gensler responded: “That’s not the intent of what we did … that’s the benefit of public comment.”
Just who are these institutional investors? Well, two of them, Ceres and Trillium Asset Management, have been around forty-plus years. They were both founded by Joan Bavaria, who was instrumental in getting this ball rolling as a "pioneer in socially responsible investing."
A network of activist companies like Ceres with large private equity and financiers on board are working to “transform” the economy over climate concerns, according to Ceres’ self-description.
In adherence, farmers will have to recreate their business model.
“Addressing these emissions will require a shift in agricultural production to more sustainable and regenerative methods…” Kate Monahan, director of shareholder advocacy at Trillium Asset Management, said in an interview this month with ESG Clarity, a website trafficking in ESG news directed at the financial sector. “It’s imperative that food companies keep improving measurement of their Scope 3 emissions’ sources to be able to prioritize actions that reduce their emissions hotspots.”
Let's hope that, even though the SEC's comment period for this proposal, which was extended for 30 days beyond the standard 60 due to the flood of response, is closed, opposition to this disastrous scheme continues to be loud and resolute.
It will increase the cost of food.
It will be tyrannical ("'transform' the economy").
It will deaden souls.
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