Business
Column: Bowing to business and the right wing, the SEC issues a pathetically watered-down climate disclosure rule
Corporate managements nationwide undoubtedly breathed sighs of relief Wednesday, when the Securities and Exchange Commission approved a rule mandating their disclosures of greenhouse gas emissions and risks from global warming.
That’s because the rule is much weaker than its original version, which was first published in March 2022. The final version removed provisions requiring disclosure of some emissions produced by a company’s entire business chain and expanded exemptions for smaller companies.
But if managements think they’ll be able to avoid making more complete disclosures than the SEC is requiring, they have another think coming.
Far more investors are making investment decisions that are informed by climate risk, and far more companies are making disclosures about climate risk.
— SEC Chairman Gary Gensler
Shareholders are demanding more. So is the European Union, which has enacted rules requiring all companies with EU branches employing more than 250 workers, more than $42 million in European revenues or more than $21 million in capital assets to make the very disclosures that the SEC dropped from its mandate, starting in 2025.
More than 3,200 U.S. corporations are expected to become subject to the EU mandate.
Then there’s California, which last year enacted two laws requiring companies with annual revenues of more than $500 million and business activities in the state to disclose their climate-related economic risks; companies with revenues of more than $1 billion face more stringent requirements to report the full range of their emissions, similar to the EU mandate.
The U.S. Chamber of Commerce and several other business lobbying groups have already filed a federal lawsuit to overturn the California law, in which they estimate that the laws will cover 10,000 companies. (Rule of thumb: If the Chamber of Commerce is on one side of a lawsuit, you can rarely go wrong in assuming the public interest is on the other side.)
In any event, the laws have the support of numerous corporations with headquarters or sizable business interests in California, including Microsoft and Apple.
“We know that consistent, comparable, and reliable emissions data at scale is necessary to fully assess the global economy’s risk exposure and to navigate the path to a net-zero future,” Microsoft and 14 other businesses wrote in an Aug. 14 letter to state legislative leaders.
The state’s legislation, they wrote, “would break new ground on ambitious climate policy and would allow the largest economic actors to fully understand and mitigate their harmful greenhouse gas emissions.”
Meanwhile, 10 states with Republican political leaderships have signaled that they will sue to invalidate the SEC initiative, on the claim that the rule “exceeds the agency’s statutory authority.”
All this does more than hint at the headwinds the SEC faced in crafting its final disclosure rule. These included objections from many in the business community and conservative politicians pursuing their fatuous campaigns against ESG policies — environmental, social and governance — of corporations and investment firms.
The SEC’s Democratic majority, led by its chairman, Gary Gensler, also plainly harbored concerns about how its more expansive rule proposal might fare with a conservative federal judiciary, including a Supreme Court that seems to be searching for grounds to pare back the reach of federal regulatory agencies, if not invalidate their authority altogether.
Gensler observed after the commission vote that its goal was to provide for consistency in how companies report information that most are already compiling.
“Far more investors are making investment decisions that are informed by climate risk, and far more companies are making disclosures about climate risk,” he said. He didn’t specifically defend the SEC’s weakening of its initial proposal, except to say that the plan was revised “based upon public feedback.”
Let’s take a closer look at the issues and the political context.
First, here’s what the SEC’s rule encompasses.
At its core are disclosures about emissions of greenhouse gases, including carbon dioxide — emissions that trap heat within the Earth’s atmosphere, driving global temperatures higher. Global warming produces major changes in climatological manifestations — more storms of greater severity, droughts, melting ice producing a rise in sea levels, and so on.
Emissions fall into three general categories. Scope 1 emissions are those a company produces directly, say from its delivery trucks, boilers, refineries, manufacturing plants. Scope 2 emissions are those it produces indirectly, for example, from the power plants from which it purchases its electricity.
Scope 3 emissions are the most contentious. They’re produced by a company’s vendors when it orders supplies and consumers when they use its products. In general this is the largest category, accounting for 70% of total emissions for many businesses and as much as 90% for some. But they can be hard to define, calculate and manage.
The SEC originally contemplated requiring disclosures of all three categories. The final rule removed the Scope 3 reporting requirement entirely, and mandates reporting of Scope 1 and 2 emissions only when they have or are likely to have “a material impact on the registrant’s business strategy, results of operations, or financial condition.”
Those changes gratified some business organizations and their henchpersons in Congress, but disturbed environmental groups. Removing Scope 3 disclosures, said Danielle Fugere, president of the Berkeley-based environmental organization As You Sow, “creates a significant hole in shareholders’ understanding of climate risk.”
The fact is that full disclosure of these risks is something that regulators around the world, as well as shareholders and investors, have been demanding for years. Who’s against it? Head-in-the-sand Republicans and right-wing culture warriors, that’s who.
Hester Peirce, one of the two Republicans on the SEC, carried their ball into its meeting room. Weak as the final rule is, she wasn’t satisfied. As enacted, she groused in a statement Wednesday, the rule “still promises to spam investors with details about the Commission’s pet topic of the day — climate.”
That dismissal of global warming, an elemental threat to life on Earth, as a “pet topic” should tell you how fundamentally unserious GOP policymakers are about their responsibilities.
The anti-ESG cabal among state-level Republicans appears determined to undermine the interests of their own constituents, all for the sake of “owning the libs.”
Consider three states that have been among the leaders in banning investment firms from doing business with their governments because of the firms’ support for environmental policies: Texas, Florida and Louisiana.
Those are the three states that have led the nation in cumulative damage costs due to climate-related disasters from 1980 through 2022 — racking up expenses of $380 billion, $370 billion and $290 billion, respectively.
The general approach of disclosure critics has two threads. One is to pretend that the effects of global warming are irrelevant to the operations and the future of most businesses. The other is to assert that they’re too nebulous to calculate or, alternatively, that performing the calculations is just too burdensome.
Neither argument holds water.
I reported in 2021 that shareholders were already asking for more disclosures from managements about how their activities contribute to climate change, and more about how climate change will affect their destinies.
Fossil fuel companies weren’t the only targets of shareholder resolutions on these topics — they also appeared on the agendas of annual meetings of manufacturers, retailers, banks and many others.
In 2023, shareholder resolutions demanding climate and environmental disclosures dominated the proxy season with 146 filed, according to the Interfaith Center on Corporate Responsibility, which tracks ESG issues. Many won plurality support, but more than half dealing with climate were withdrawn after managements made commitments to their sponsors to meet their disclosure goals.
Investment watchdogs are on the case. Fitch Ratings, which analyzes corporate creditworthiness, says that as many as 20% of the 1,650 corporations it studied might face ratings downgrades due to their “climate vulnerabilities if such risks are not mitigated” by 2035. BlackRock, the world’s largest asset management firm, has said it’s not backing off from pushing corporations to disclose how they address climate-related risks.
The U.S. government’s National Oceanic and Atmospheric Administration identified 28 weather- and climate-related disasters costing $1 billion or more in 2023, including a drought, four floods, 22 severe storms and a wildfire.
2023 brought a record number of weather- and climate-related disasters costing more than $1 billion each to the U.S., with a toll of 492 deaths and damage of more than $90 billion.
(NOAA)
That was the highest number recorded since NOAA began taking count in 1980 and the ninth consecutive year in which 10 or more billion-dollar weather or climate disasters struck the U.S.
NOAA’s initial estimate is that the 2023 disasters cost more than $90 billion, but it’s certain to rise, since the ultimate price tag of the 18 disasters reported in 2022 came to more than $165 billion. The disasters took 492 lives.
To put it another way, any management of a large business in the U.S. that thinks it can evade the costs of global warming is living in a dream world.
Global warming deniers in business and politics persist in treating the climate crisis as merely a ginned-up topic of debate. That’s the gist of the business lobby’s lawsuit over the California laws.
The lawsuit treats the laws, bizarrely, as infringements on companies’ 1st Amendment rights. The state, the plaintiffs assert, is forcing “thousands of companies to engage in controversial speech that they do not wish to make” — speech they say is “political, and thus controversial.”
This is absurd on its face — tantamount to Donald Trump’s claim that by urging his followers to march to the Capitol on Jan. 6, 2021, he was just exercising his right to free speech.
This would allow any mandated disclosure to be reduced to a free-speech violation — after all, any such disclosure must be expressed as a series of words.
The courts, including the Supreme Court, have generally rejected assertions that mandated disclosures violate the 1st Amendment when the disclosures serve a legitimate government interest, such as protecting investors from fraudulent claims, or providing investors with important information — for example, the level of emissions by a public corporation or its potential exposure to global warming.
In this case, the business lobbies stretch to the breaking point their description of the state’s mandated emission disclosures as mere speech. They also assert that the state’s purpose is merely to “fuel pressure campaigns against business.”
They can’t make that claim stick with a straight face, so they misrepresent the laws. Here’s how they quote a state Senate analysis of one of the statutes: “‘For companies, the knowledge’ that their compelled statements ‘will be publicly available might encourage them to take meaningful steps’ to support the policy goals of the state.”
That’s a flagrant misquotation. Here’s what the analysis actually said: “For companies, the knowledge that their emissions will be publicly available might encourage them to take meaningful steps to reduce GHG emissions.” The words and phrases that the plaintiffs replaced with their own tendentious language are in italics.
It’s not the “compelled statements” that will be publicly available, but the actual level of their emissions. If the result is “pressure campaigns” aimed at prompting the companies to be cleaner, what’s wrong with that?
As for the state’s “policy goals,” the laws aren’t aimed at supporting a goal cherished by the liberal legislators of California, as the plaintiffs want you to think, but the national and international goal of reducing greenhouse gases.
None of this is to say that the Chamber of Commerce and its fellow lobbies won’t prevail in court. But it’s proper to note that when the best arguments they muster are based on lies and misrepresentations, they might not have many other arrows in their quiver.
The highest gas prices in the country are making it tougher for some gig drivers to make a living.
Gas prices have shot up amid the war in the Middle East. On average, California gas prices are the most expensive in the United States, according to data from the American Automobile Assn. The average price of regular gas in California is almost $6. The national average is a little above $4.
While Uber and Lyft drivers have concocted clever ways to cut gas consumption, they say that without some relief they will be forced to leave the ride-hailing business.
John Mejia was already struggling to make money as a part-time Lyft driver when soaring gas prices made his side hustle even harder.
“Unfortunately, it’s the economics of paying less to drivers and gas prices,” he said. “It actually is pulling people out of the business.”
Guests at The Westin St. Francis hotel get into an Uber.
(Jess Lynn Goss / For The Times)
Gig work offers drivers the freedom to work for themselves and more flexibility, but being independent contractors also means they must shoulder unexpected costs.
Ride-sharing companies say they’re trying to help, but drivers say the gas relief comes with caveats. For now, drivers say they’re being pickier about what rides they accept, cutting hours and are looking at other ways to make money.
Mejia, who started driving for Lyft more than a decade ago, said in his early days, he would sometimes make $400 in three hours. Now it takes 12 hours to rake in $200.
The San Francisco Bay Area consultant is an active member of the California Gig Workers Union, so he knows he isn’t alone. California has more than 800,000 gig rideshare drivers, according to the group, which is affiliated with the Service Employees International Union.
On social media sites such as Reddit and Facebook, gig workers have posted about how the higher gas prices are eating into their earnings. Among the tricks they are suggesting: reducing the number of times the ignition is turned on or off, avoiding traffic, working in specific neighborhoods and at times with high demand and switching to electric vehicles.
Gig drivers usually have only seconds to decide whether to accept a ride on the app, but they have become more strategic about which rides and deliveries they accept.
That means they are more likely to sit back in their cars and wait for higher fares for quick pick-up and drop-off.
“I highly recommend the ‘decline and recline’ strategy, rejecting unprofitable rides until a better one appears,” wrote Sergio Avedian, a driver, in the popular blog the Rideshare Guy.
Pedestrians cross the street in front of a Lyft and Uber driver on Wednesday. High gas prices have made it hard for gig drivers to make a living, cutting into their profits.
(Jess Lynn Goss / For The Times)
Uber, Lyft and other companies have unveiled several ways to help drivers save on gas.
Uber said drivers can get up to 15% cash back through May 26 with the Uber Pro card, a business debit Mastercard for drivers and couriers. Based on a worker’s tier, they can get up to $1 off per gallon of gas through Upside — an app that offers cash rewards — and up to 21 cents off per gallon of gas with Shell Fuel Rewards. The company also offers incentives for drivers who want to switch to electric vehicles.
“We know the price of gas is top of mind for many rideshare and delivery drivers across the country right now,” Uber said in a blog post about its gas savings efforts.
Lyft also said it’s expanding gas relief through May 26 because the company knows that the extra cost “hits hardest for drivers who depend on driving for their income.”
The company is offering more cash back, depending on the driver’s tier, for drivers who use a Lyft Direct business debit card to pay for gas at eligible gas stations. They can get an additional 14 cents per gallon off through Upside.
Drivers say the fine print on the offers dictates which card they use and where they fill up gas, making it difficult for them to save money.
“If I do the math, it’s ridiculous,” Mejia said. “They’re offering us nothing.”
Uber declined to comment, but pointed to its blog post about the gas relief efforts. Lyft also referenced the blog post and said “the gas savings were structured through rewards to maximize stackable opportunities.”
Guests at The Westin St. Francis hotel get into an Uber.
(Jess Lynn Goss / For The Times)
Gig workers have struggled with rising gas prices in the past.
In 2022, Lyft and Uber temporarily added a surcharge to their fares amid record-high gas prices following Russia’s invasion of Ukraine. This year, Uber is adding a fuel charge to its fares in Australia for roughly two months to offset the high cost of gas for drivers. Lyft said it hasn’t added a fuel charge in the U.S. or elsewhere.
Margarita Penalosa, who drives full time for Uber and Lyft in Los Angeles, started as a rideshare driver in 2017. Back then, gas was cheaper. She would easily hit her goal of making $300 in eight hours. Now she’s making just $250 after working as much as 14 hours.
Gas prices, she said, used to be less than $3 per gallon. Now some gas stations are charging more than $8 per gallon.
“Take out the gas. Take out the mileage from my car and maintenance. How much [do] I really make? Probably I get $11 for an hour,” she said.
Jonathan Tipton Meyers wants to spend fewer hours as a rideshare driver.
He already juggles multiple gigs even while driving for Uber and Lyft in Los Angeles. He’s a mobile notary and loan signing agent, a writer and performer.
Driving is “a very challenging, full-time job,” he said. “It’s very taxing and, of course, wages were just continually decreasing.”
John Mejia, a longtime Lyft and Uber driver, poses for a portrait before attending a meeting about unionizing gig drivers.
(Jess Lynn Goss / For The Times)
Even if oil continues to flow through the Strait of Hormuz, which Iran reopened Friday, it could take a while for gas prices to come down to earth, said Mark Zandi, the chief economist at Moody’s Analytics.
“There’s an old adage that prices rise like a rocket and fall like a feather,” he said. “I think that’ll apply.”
In the meantime, it will be survival of the fittest drivers. If enough of them decide to leave the apps, the ride-hailing companies could be forced to raise fares further to attract some back.
“Those who approach rideshare driving strategically, tracking expenses, choosing trips carefully, and optimizing efficiency are far more likely to weather periods of high gas prices,” wrote Avedian in the Rideshare Guy blog. “For everyone else, a spike at the pump can quickly turn rideshare driving from a side hustle into a money-losing venture.”
The proprietor of Los Angeles’ legendary Clifton’s has given up on reopening the shuttered venue.
It’s just too difficult to do business in downtown’s historic core, he says.
Andrew Meieran bought Clifton’s on Broadway in 2010 and poured more than $14 million into repairs, renovations and upgrades, adding additional bar and restaurant spaces in the four-story building. In 2018, he found that demand for cafeteria food was too low to be profitable, and he pivoted to a nightclub and lounge concept called Clifton’s Republic, featuring multiple dining and drinking venues. Meieran has tried elaborate themed environments, such as a tiki bar and forest playgrounds, and renting out the location for big events to spark more interest.
It was never easy, but during and since the pandemic, the neighborhood has grown increasingly unsafe as downtown has emptied of office workers and visitors.
Storefronts are gated up due to vandalism in the historic district in downtown Los Angeles on Tuesday.
(Eric Thayer / Los Angeles Times)
The alley behind Clifton’s Cafeteria in the downtown historic district Tuesday.
(Eric Thayer / Los Angeles Times)
Vandalism has been rampant, with graffiti appearing on the historic structure almost daily. Vandals would use acid or diamond glass cutters to deface the windows, often cracking the glass. It would cost Meieran more than $30,000 each time to replace the windows. Insurance companies either stopped offering policies that covered vandalism or raised premiums by as much as 600%, he said.
There has been continuous crime in the area, he said, including multiple assaults on people in front of his building. He last shut the venue last year, hoping things would improve and he could come back with a business that could work. Now he has given up. Someone else may take over the space or even the name of the historic spot, but he is done trying.
“We’ve lost our way,” Meieran said. “I want to get up on the tops of the skyscrapers and yell that people need to pay attention to this.”
The disenchantment of a business leader who used to be one of downtown L.A.’s biggest backers shines a spotlight on the stubborn safety concerns, rising costs and thinner foot traffic that have made it increasingly difficult for even iconic businesses to survive.
The once-popular institution dates back to 1935, when it was a Depression-era cafeteria and kitschy oasis that sold as many as 15,000 meals a day when Broadway was the city’s entertainment hub.
It served traditional cafeteria food such as pot roast, mashed potatoes and Jell-O in a woodsy grotto among fake redwood trees and a stone-wrapped waterfall reminiscent of Brookdale Lodge in Northern California.
It’s not the only once-prominent destination that has failed to find a way to flourish in today’s market. Cole’s, one of L.A.’s most famous restaurants and often credited with inventing the French dip sandwich, closed last month after a 118-year run.
“The bigger problem for us and the rest of the industry is the high cost of doing business,” said Cedd Moses, who used to operate Cole’s and has backed many other bars and restaurants in historic buildings downtown for decades. “That’s what is killing independent restaurants in this city.”
Outside of Clifton’s Cafeteria.
(Eric Thayer / Los Angeles Times)
Clifton’s Republic owner Andrew Meieran stands next to a boat on the top floor of the historic restaurant in 2024.
(Wally Skalij / Los Angeles Times)
Clifton’s opened and closed repeatedly during the pandemic and, more recently, after a burst pipe caused extensive damage. Meieran opened it for special events such as last Halloween, but it has otherwise been closed.
Police are woefully understaffed and hampered by public policy, said Blair Besten, president of downtown’s Historic Core Business Improvement District, a nonprofit that arranges graffiti removal, trash pickup and safety patrols in the area.
Businesses and residents in the area would like to see a bigger police presence, but there have been protests against that by people who are not from downtown, she said.
“People are starting to see the fruits of the defunding movement,” she said. “It has not led us to a better place as a city.”
The Los Angeles Police Department is making progress downtown, Captain Kelly Muniz said, with violent crime down more than 10% from last year.
“While we’re working very hard to solve crime, to prevent crime, there are still elements such as trash, open-air drug use, homelessness and graffiti,” she said. “We’re swinging in the right direction.”
Retailers have been opting out of downtown L.A., said real estate broker Derrick Moore of CBRE, who helps arrange commercial property leases. Brands have headed to more vibrant nearby neighborhoods such as Echo Park and Silver Lake.
“A lot of operators are just electing to skip over downtown,” he said. “They’re leasing spaces elsewhere, where they feel they have a greater chance at higher sales.”
A man walks past a pile of trash left on the street in the historic district.
(Eric Thayer / Los Angeles Times)
While some businesses are struggling, many downtown residents say their perceptions of safety are improving and that the area is regaining some vibrancy.
“A lot of people live here. I think people forget that,” Besten said. “We’re all surviving. It’s just hard for all the businesses to survive.”
A green shoot for the Historic Core is Art Night on the first Thursday of every month, when 50 or 60 locations, including permanent art galleries and pop-up galleries in unused storefronts, display art to map-toting visitors who come for the occasion.
They often end up in Spring Street bars, which more typically thrive on weekend nights but are still a draw to downtown.
“I think nightlife will thrive downtown, since bars attract people that don’t mind a little grittier atmosphere,” said Moses. “Our sales are hitting new records at our bars downtown, fortunately, but our costs have risen dramatically.”
A closed sign for Clifton’s Cafeteria.
(Eric Thayer / Los Angeles Times)
Clifton’s former backer, Meieran, says he doesn’t think things are going to bounce back enough to warrant more massive investment. He has sold the building, and the owner is looking for a new tenant to occupy Clifton’s space. He still controls the Clifton’s name.
While there is still a chance he could let someone else use the name Clifton’s, Meieran is done for now — too many bad memories.
“There was a guy who was terrorizing the front of Clifton’s because he decided he wanted to live in the vestibule in front, and he didn’t want us to operate there,” Meieran said. “He would threaten to kill anybody who came through.”
He doesn’t believe official statistics that show crime and homelessness are way down in the area, and he doesn’t want to restart a business when criminals can so easily erase his hard work.
“What business that’s already on thin margins can survive that?” he said.
Trader Joe’s customers might soon get a payout from the popular grocery chain.
The Monrovia-based company agreed to a $7.4-million settlement in a class action lawsuit that claimed customers were left vulnerable to identity theft.
Customers who purchased items with a credit or debit card from March to July in 2019 might be eligible for a payment as part of the settlement.
The plaintiff alleged that some receipts printed in 2019 included 10-digit credit or debit card numbers —double what’s allowed under the Fair and Accurate Credit Transactions Act.
Trader Joe’s “vigorously denies any and all liability or wrongdoing whatsoever,” the grocery chain said in the settlement website. The grocery chain decided to settle to avoid a long and costly litigation process.
The payout will go toward paying impacted customers as well as attorney fees and other expenses.
About $2.6 million will go toward attorney fees, and the plaintiff will receive a $10,000 incentive payment, according to the settlement. The remaining funds will be distributed evenly among customers who submit valid claims.
It’s unclear how much money each customer would get, but the payout could be about $102, according to the settlement notice.
To receive the payout, customers must have received a receipt displaying the first six and last four digits of the card number.
Some customers identified as part of the settlement class have been notified and received a class ID number to file a claim.
Customers have from now until June 6 to file a claim online or by phone.
A customer not identified in the settlement can still submit a claim by entering the first six and last four digits of the card used, along with the date it was used at Trader Joe’s.
Brian Keim, the plaintiff who brought the case, used his debit card at stores in Florida in 2019. He said some stores printed transaction receipts that included the first six and last four digits of customers’ card numbers.
The receipts did not include other personal information, such as the middle digits of the users’ cards, the cards’ expiration dates, or the users’ addresses. No customer has reported identity theft as a result of the receipts since the lawsuit was filed, the grocer said.
However, identity theft doesn’t require submitting a claim for payment.
The settlement was agreed upon by both the grocer and the plaintiff, but still has to be approved by a court. A hearing is set in August.
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