Compliance December 2, 2022

Republicans Move to Prevent SEC Climate Disclosure Requirements

Though the SEC has not approved its proposal to require climate-risk and carbon emissions disclosures, Republicans are moving to prevent them before they can take effect.

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Reps. Bill Huizenga, R-Michigan, and Andy Barr, R-Kentucky, introduced legislation today that would prevent the SEC from requiring securities issuers to make disclosures about carbon emissions, unless the information is likely to be material to an investor. The bill is the Mandatory Materiality Requirement Act.

Huizenga and Barr are ranking members of subcommittees of the U.S. House Committee on Financial Services.

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Though the legislation does not explicitly mention items such as “climate,” “environment” or “greenhouse gas,” it would amend both the Securities Act of 1933 and the Securities Exchange Act of 1934 to require that any disclosure mandated by the SEC is material for investors’ investment decisions. It is intended to pre-empt an SEC proposal from March that public companies provide certain climate-related financial data and information on greenhouse gas emissions in their public disclosure filings.

Barr explained: “I am proud to be an original co-sponsor of the Mandatory Materiality Requirement Act in the House to ensure that the SEC is sticking to its statutory mandate and commend Representative Huizenga and Senator [Mike] Rounds [R-South Dakota,] for helping to lead the charge against woke climate policy in our financial markets and institutions.”

Rounds introduced similar legislation in September. That bill, which carries the same name, likewise does not make explicit mention of “climate,”, “environment,” or “greenhouse gas.” However, the bill has the same stated intent as its House companion, Rounds explained in a press release: “American businesses should not be used as a gateway to advance climate-change policy.”

In March, the SEC proposed a rule that would require public companies to disclose information about their “climate-related risks that are reasonably likely to have a material impact on their business.” The proposal would require public companies to disclose information about direct greenhouse gas emissions, indirect emissions produced as a result of electricity consumption and emissions from its supply chain. This rule has not been finalized and is not in effect.

Another related bill, proposed Monday by Senator John Boozman, R-Arkansas, called the Protect Farmers from the SEC Act, specifically takes aim at the provision to require greenhouse gas emissions to be disclosed by agriculture companies. Boozman’s bill would exempt agriculture companies from any future disclosure requirements. Unlike the other bills, Boozman’s does mention “greenhouse gas” in its text.

Senator Tom Cotton, R-Arkansas, proposed legislation on Thursday that addresses the U.S. Department of Labor regulation that would permit ESG considerations to be used by retirement plan fiduciaries. Cotton’s one-page bill would invalidate the DOL rule without replacing it with other legal guidance. In a press release, Cotton said that retirement plans should avoid, “ESG scams.”

Data and Research December 2, 2022

Few Participants Changed The Asset Allocation of Their Contributions Through Q3 2022

Defined contribution plan participants make fewer changes than they did following the Global Financial Crisis, ICI data finds.  

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Most defined contribution participants stayed the course in saving for retirement in 2022, despite volatile market swings, rising interest rates and geopolitical unrest, Investment Company Institute data shows.

Through the first three quarters of 2022, 3.8% of defined contribution plan participants changed the asset allocation of their plan contributions, an especially revealing number when compared to 9.8% who changed back in Q3 2009, the ICI Survey of DC Plan Recordkeepers found.

Additionally, the survey found that 7.4% of participants changed the asset allocations of their account balances through the first three quarters of 2022, compared to 9.9% who did so in the same period of 2009.

ICI launched the survey following the financial crisis of 2007-08 to research participant behavior regarding retirement planning and savings, explains Sarah Holden, senior director of retirement and investor research at ICI.

“The key takeaways I saw are that retirement savers are remarkably resilient and really stay committed to the to the process,” she says. “[V]ery few people stop[ped] contributing, very few people took withdrawals and, for the most part, they stayed the course with their asset allocations, even as the stock market has been moving down and moving around.”

In the first three quarters of 2022, the S&P 500 total return index fell 4.6%, the survey summary of findings stated.

Data compares the retirement investment and savings behavior of plan participants during and after the Global Financial Crisis based on how many stopped contributing to a retirement plan, explains Holden.

“Only 2.1% of participants stopped making contributions in their [retirement] plan in the first three quarters of this year, so that the flip side of that means 98% of them kept going,” Holden says.

Through Q3 2021, 1.2% stopped contributing to a retirement plan, 2.2% through Q3 2021 and 1.9% through Q3 2019, compared to 5% of participants who stopped contributing by Q3 2009, ICI finds.

The data highlight that many participants are steadfast and disciplined in continuing to contribute to their retirement account from every paycheck, adds Holden.

“Paycheck by paycheck, contribution activity really helps them stay the course as either the market moves up and down or as something like a pandemic hits the United States,” Holden says.

Through Q3 2021, 5.2% of participants changed the asset allocation of their contributions, versus 5.6% through the same period of 2020 and 4.2% in 2019, ICI data shows.

ICI gathered data for the survey in the first nine months, January through September, from a cross-section of defined contribution plan recordkeepers, covering more than 40 million DC plan participants.

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