A rule proposed by the Securities and Exchange Commission titled “The Enhancement and Standardization of Climate-Related Disclosures for Investors” carries with it potentially damning consequences in rural America and on the farms and ranches that support those communities and many others.
In the name of "climate catastrophe," the SEC is stepping outside their proverbial lane to require public companies to report on Scope 3 emissions, which are the result of activities from assets not owned or controlled by a publicly traded company that contribute to the value chain. All eyes would suddenly be squarely on farmers and ranchers who provide nearly every raw product that finds it way into the food-supply-chain. That contribution is valued at more than $1 trillion to the GDP and agriculture is responsible for employing more than 21 million people.
The American Farm Bureau Federation, in the comments filed with the SEC on behalf of its members and the members of 10 additional ag organizations, called the rule “wildly burdensome and expensive if not altogether impossible for many small and mid-sized farmers to comply with.”
Wildly burdensome is right. Farmers and ranchers are voluntarily — and have for many moons — engaging in the best practices for the resources with which they have been entrusted. As the proposed rule relates to agriculture, the required information about climate-related risks would also require disclosure of the greenhouse-gas emissions of the registrant and its entire value chain, which the SEC claims can help investors assess a registrant’s exposure to such risks. It’s worth noting that no farms or ranches are among the businesses registered with the SEC.
Our family operation is small to mid-sized and, like practically every other ag operation of similar size, we are completely without compliance officers and attorneys familiar with the ways of Wall Street. The cost, liability, and frankly, the disruptions to business would drive producers of food, fuel and fiber out of business. We’ve been down the “supply-chain disruption” road before quite recently and this crippling rule would snap the chain.
The SEC’s role is to protect investors, maintain fair, orderly and efficient markets, and facilitate capital formation. Disclosure of information by public companies to provide an accurate picture of the company’s performance makes sense with that end goal in mind. Knowing the exact amount of diesel fuel burned by a single tractor feeding cows is an onerous bit of information that doesn’t likely increase investor confidence.
I’m honestly uncertain where a producer might access the metric tons of carbon-dioxide equivalent produced by the day-to-day operations on a farm or ranch, and I doubt I’m alone. The disclosures would further need to be disaggregated by each constituent greenhouse-gas (carbon dioxide, methane, nitrous oxide, nitrogen trifluoride, hydrofluorocarbons, perfluorocarbons and sulfur hexafluoride). Many farms and ranchers are still lacking enough broadband connectivity to google "perfluorocarbons," much less report it with any confidence.
The argument could certainly be made that such a rule would push small to mid-sized farmers out of business, increasing consolidation, and increasing the need for imported food. It would undoubtedly further raise prices and lower availability of essential food, fuel and fiber.
According to the American Farm Bureau Federation, farmers and ranchers already comply with expansive legislative and regulatory directives that exist at the local, state and federal levels. The SEC’s proposed rule seeks to further extend regulatory burdens on farmers and ranchers, all while lacking appropriate statutory authority. In fact, Congress has been very clear that agencies may not require mandatory reporting of greenhouse-gas emissions from livestock. The SEC is out of bounds here, attempting to regulate agriculture, an industry that does not belong under SEC jurisdiction.
Of course, climate activities don’t fall under the jurisdiction of the SEC either, but what do I know.
Rachel Gabel writes about agriculture and rural issues. She is assistant editor of The Fence Post Magazine, the region’s preeminent agriculture publication. Gabel is a daughter of the state’s oil and gas industry and a member of one of the state’s 12,000 cattle-raising families, and she has authored children’s books used in hundreds of classrooms to teach students about agriculture.