1 00:00:02,920 --> 00:00:07,280 Speaker 1: Bloomberg Audio Studios, podcasts, radio news. 2 00:00:07,600 --> 00:00:11,119 Speaker 2: Greetings to our TV and radio audiences worldwide. I'm Joe 3 00:00:11,119 --> 00:00:14,640 Speaker 2: Matthew alongside Kaylee Lines in Washington, d C. In a 4 00:00:14,640 --> 00:00:19,280 Speaker 2: pleasure to welcome the Chair of the Securities and Exchange Commission, 5 00:00:19,280 --> 00:00:22,560 Speaker 2: Gary Ginsler. Welcome back to our Washington bureau here at Bloomberg. 6 00:00:22,560 --> 00:00:23,240 Speaker 2: It's good to see it. 7 00:00:23,320 --> 00:00:24,560 Speaker 3: Great to be with both of you. 8 00:00:25,040 --> 00:00:28,280 Speaker 2: Looking forward to a conversation today about the climate disclosure 9 00:00:28,400 --> 00:00:30,600 Speaker 2: regulations that you're unveiling. I have to ask you first 10 00:00:30,640 --> 00:00:33,000 Speaker 2: about New York Bank Corp. With some of the drama 11 00:00:33,040 --> 00:00:35,479 Speaker 2: that we've seen over this past week and missed filing, 12 00:00:35,520 --> 00:00:39,199 Speaker 2: concerns about commercial real estate fallout. Are you monitoring this? 13 00:00:39,280 --> 00:00:42,160 Speaker 2: Is there anything you can do to protect investors here? 14 00:00:43,400 --> 00:00:46,559 Speaker 3: Well, I think your viewers would understand that I'm in 15 00:00:46,600 --> 00:00:48,360 Speaker 3: the role I'm in. I'm not going to comment on 16 00:00:48,400 --> 00:00:54,200 Speaker 3: any one registrant or file, but many banks or public companies, 17 00:00:54,800 --> 00:00:58,360 Speaker 3: those banks need to make sure that they make full, 18 00:00:58,440 --> 00:01:02,080 Speaker 3: fair and truthful disclosures to the public so that the 19 00:01:02,080 --> 00:01:05,120 Speaker 3: public can make their investment decisions. I know we're going 20 00:01:05,160 --> 00:01:08,360 Speaker 3: to be talking about climate, but it turns out it's connected. 21 00:01:08,400 --> 00:01:14,520 Speaker 3: They need to make those disclosures that investors take investment 22 00:01:14,520 --> 00:01:17,640 Speaker 3: decisions on and make sure they have proper controls to 23 00:01:17,680 --> 00:01:22,320 Speaker 3: make those disclosures. But I don't have anything more in 24 00:01:22,319 --> 00:01:23,559 Speaker 3: this one bank. 25 00:01:23,680 --> 00:01:26,440 Speaker 1: But just broadly, you're not concerned about systemic risk that 26 00:01:26,520 --> 00:01:28,759 Speaker 1: might be emanating from commercial real estate. 27 00:01:31,319 --> 00:01:33,400 Speaker 3: Again, I'm not going to comment to a one bank 28 00:01:33,440 --> 00:01:39,280 Speaker 3: and so forth, but broadly, at the SEC, we are 29 00:01:40,360 --> 00:01:44,480 Speaker 3: always monitoring markets for systemic risk. And the reason is 30 00:01:44,600 --> 00:01:48,920 Speaker 3: is because investors get harmed when one bank or one 31 00:01:49,000 --> 00:01:50,800 Speaker 3: non bank. It could be a bank, it could be 32 00:01:50,880 --> 00:01:55,400 Speaker 3: a hedge fund that fails and spills out into the market. 33 00:01:56,240 --> 00:01:58,800 Speaker 3: I've been kind of it's eight my first rodeo. I 34 00:01:58,920 --> 00:02:02,440 Speaker 3: was even in the Clinton when long term capital management failed. 35 00:02:03,000 --> 00:02:05,880 Speaker 3: I was in the abom Of administration when we were 36 00:02:06,720 --> 00:02:09,400 Speaker 3: cleaning up after the OA crisis. And it's always the 37 00:02:09,440 --> 00:02:13,320 Speaker 3: American public, both investors and issuers that get hurt. So 38 00:02:13,320 --> 00:02:17,200 Speaker 3: at the SEC, we do monitor for systemic risk in 39 00:02:17,320 --> 00:02:20,640 Speaker 3: our remit and then we work with Secretary Yellen and 40 00:02:20,680 --> 00:02:23,080 Speaker 3: share pal and share our thoughts. 41 00:02:23,639 --> 00:02:25,880 Speaker 1: So to return to this question of disclosures, and this 42 00:02:26,000 --> 00:02:28,240 Speaker 1: gets us to the news out of the SEC today, 43 00:02:28,280 --> 00:02:31,640 Speaker 1: you have adopted now climate disclosure rules that have been 44 00:02:31,680 --> 00:02:35,040 Speaker 1: significantly watered down from what was initially proposed. Scope three 45 00:02:35,160 --> 00:02:38,600 Speaker 1: has been removed. For Scope one and two, companies are 46 00:02:38,680 --> 00:02:41,880 Speaker 1: essentially going to have to decide whether these climate risks 47 00:02:41,880 --> 00:02:45,320 Speaker 1: are material to them. It's a pretty significant change. Why 48 00:02:45,360 --> 00:02:48,200 Speaker 1: not repropose it by just adopting it today rather than 49 00:02:48,240 --> 00:02:50,320 Speaker 1: opening it back up for comment? Have you opened the 50 00:02:50,360 --> 00:02:53,440 Speaker 1: sec up to more scrutiny and potentially more litigation that 51 00:02:53,440 --> 00:02:54,040 Speaker 1: could come from this. 52 00:02:54,160 --> 00:02:56,640 Speaker 3: Well, let's just step back for your viewers just for 53 00:02:56,639 --> 00:03:02,200 Speaker 3: a moment. What we have here is that today literally hundreds, 54 00:03:02,240 --> 00:03:07,320 Speaker 3: maybe a thousand companies already today are making information about 55 00:03:07,320 --> 00:03:11,640 Speaker 3: climate risk available to their investors. They're often doing it 56 00:03:11,919 --> 00:03:16,120 Speaker 3: on the internet. There's sustainability reports and so forth. What 57 00:03:16,160 --> 00:03:19,680 Speaker 3: we did today is we adopted a rule we hadn't 58 00:03:19,720 --> 00:03:24,520 Speaker 3: had a rule previously, and we said, these disclosures need 59 00:03:24,560 --> 00:03:28,600 Speaker 3: to be in your filings and your annual reports and 60 00:03:28,680 --> 00:03:34,239 Speaker 3: your registration statements if material. That's consistent with five seven 61 00:03:34,320 --> 00:03:39,600 Speaker 3: decades of what we do. Materiality is the benchmarkets. Investors 62 00:03:39,640 --> 00:03:43,880 Speaker 3: get to make the investment decision based upon the material disclosures. 63 00:03:44,200 --> 00:03:48,720 Speaker 3: In this case, climate risk is something investors want to 64 00:03:48,760 --> 00:03:54,280 Speaker 3: know about Hundreds of companies are already making such information available, 65 00:03:54,280 --> 00:03:57,640 Speaker 3: but this will give it more reliability. 66 00:03:58,480 --> 00:04:02,080 Speaker 2: What's the cost involved here for companies that will be 67 00:04:02,160 --> 00:04:05,720 Speaker 2: new to these disclosures? Typically critics point to red tape. 68 00:04:05,720 --> 00:04:08,320 Speaker 2: Beyond the politics, your red tape and increased costs. You 69 00:04:08,360 --> 00:04:11,760 Speaker 2: actually have a sense of this already for those that 70 00:04:11,840 --> 00:04:14,720 Speaker 2: are disclosing, and I suspect from the comments that you received, 71 00:04:15,080 --> 00:04:17,640 Speaker 2: particularly companies that are just making the threshold. I know 72 00:04:17,680 --> 00:04:21,039 Speaker 2: you have carve outs for some smaller publicly traded companies, 73 00:04:21,080 --> 00:04:23,280 Speaker 2: but would be the additional cost of this due diligence? 74 00:04:23,440 --> 00:04:25,120 Speaker 2: Could you put a number on it? So we. 75 00:04:26,720 --> 00:04:29,440 Speaker 3: Lay this all out in this release. It's over eight 76 00:04:29,560 --> 00:04:32,120 Speaker 3: hundred pages if you want to have some weekend reading. 77 00:04:33,600 --> 00:04:37,560 Speaker 3: But we really based cost estimates on what commentors had 78 00:04:37,560 --> 00:04:40,400 Speaker 3: given us, and you asked. We got some very We 79 00:04:40,480 --> 00:04:44,680 Speaker 3: got twenty four thousand comments on this, and in terms, 80 00:04:44,800 --> 00:04:49,480 Speaker 3: it depends on the issuer. If an issuer actually determined 81 00:04:49,520 --> 00:04:54,040 Speaker 3: that it's not material to their investors, the cost would 82 00:04:54,040 --> 00:04:59,760 Speaker 3: be probably quite low. But if they determine that, for instance, 83 00:05:00,240 --> 00:05:05,960 Speaker 3: to inform their investors properly that greenhouse gas emissions are 84 00:05:06,080 --> 00:05:09,760 Speaker 3: material then the costs go up, but again in the release, 85 00:05:10,360 --> 00:05:13,960 Speaker 3: it was measured from a couple hundred thousand per issuer 86 00:05:14,520 --> 00:05:18,240 Speaker 3: to I think upwards to high six figures, but still 87 00:05:18,240 --> 00:05:21,159 Speaker 3: in the six figure range per issue. 88 00:05:20,720 --> 00:05:22,799 Speaker 1: But leaving it up to the issuer to decide whether 89 00:05:22,880 --> 00:05:27,360 Speaker 1: this is material. Could this actually result in less disclosure 90 00:05:27,400 --> 00:05:31,320 Speaker 1: around climate related risks, not more to avoid incurring some 91 00:05:31,360 --> 00:05:32,520 Speaker 1: of those compliance costs. 92 00:05:32,560 --> 00:05:34,680 Speaker 3: Well, what's interesting is if you look at the Russell 93 00:05:34,720 --> 00:05:37,599 Speaker 3: one thousand, the top thousand companies, some surveys show that 94 00:05:37,600 --> 00:05:42,760 Speaker 3: already ninety percent talk about climate somewhere climate risk, and 95 00:05:42,839 --> 00:05:46,840 Speaker 3: about sixty percent put out something about these so called 96 00:05:46,880 --> 00:05:53,040 Speaker 3: greenhouse gas emissions. And they're already doing it because investors 97 00:05:53,080 --> 00:05:58,240 Speaker 3: want to get that information. But again, our history, our 98 00:05:58,400 --> 00:06:02,200 Speaker 3: remit is about that which is material for investors, and 99 00:06:02,240 --> 00:06:08,200 Speaker 3: that's what we're doing here, and we're climate risk agnostic. 100 00:06:09,160 --> 00:06:14,440 Speaker 3: And if more companies make this disclosure or fewer make 101 00:06:14,480 --> 00:06:17,600 Speaker 3: the disclosure, it's about materiality. But I would say what 102 00:06:17,680 --> 00:06:20,880 Speaker 3: we did today is important because it will bring some 103 00:06:20,920 --> 00:06:22,680 Speaker 3: consistency and it's a real rule. 104 00:06:24,120 --> 00:06:27,799 Speaker 2: Kaylee referenced the potential for legal action here. I suspect 105 00:06:27,800 --> 00:06:28,080 Speaker 2: that you know. 106 00:06:28,160 --> 00:06:29,320 Speaker 3: It's part of our democracy. 107 00:06:29,520 --> 00:06:32,680 Speaker 2: Some time into this indeed, and obviously legal challenges are 108 00:06:32,920 --> 00:06:35,840 Speaker 2: already being planned. There are nine states being led by 109 00:06:35,839 --> 00:06:37,760 Speaker 2: West Virginia at this point we've heard about. But I 110 00:06:37,760 --> 00:06:39,640 Speaker 2: wonder when you consider this, and you've been down this 111 00:06:39,720 --> 00:06:44,440 Speaker 2: road before. Is it governments, is it corporations, is it 112 00:06:44,560 --> 00:06:48,279 Speaker 2: environmentalists who will bring the legal challenges to the SEC? 113 00:06:48,400 --> 00:06:49,400 Speaker 2: Or it is all of them? 114 00:06:50,160 --> 00:06:53,919 Speaker 3: Again, I think that at the SEC we endeavor to 115 00:06:53,920 --> 00:06:56,560 Speaker 3: do things within the law and how the courts interpret 116 00:06:56,560 --> 00:06:59,920 Speaker 3: the law, and so we take the economics into considering, 117 00:07:00,240 --> 00:07:04,000 Speaker 3: we take these twenty four thousand comments into consideration, and 118 00:07:04,080 --> 00:07:06,960 Speaker 3: of course we take in another law, it's not the 119 00:07:07,000 --> 00:07:10,720 Speaker 3: Security's law, called the Administrative Procedures Act, how we do 120 00:07:10,800 --> 00:07:16,800 Speaker 3: rule writing. I feel quite confident that we've done something 121 00:07:16,840 --> 00:07:21,280 Speaker 3: within the congressional mandate. And why is that. It's because 122 00:07:21,400 --> 00:07:24,600 Speaker 3: we're a disclosure agency and that's all we're doing here. 123 00:07:25,640 --> 00:07:30,760 Speaker 3: Companies already thousand plus companies are already putting out some 124 00:07:30,880 --> 00:07:35,760 Speaker 3: climate risk information. Investors are already making decisions, and we're 125 00:07:35,760 --> 00:07:40,840 Speaker 3: saying grounded in materiality, put it in your filings and 126 00:07:40,880 --> 00:07:43,679 Speaker 3: be consistent with what you're. 127 00:07:43,480 --> 00:07:46,000 Speaker 1: Doing on the subject. Of consistency. Though, if you're a 128 00:07:46,000 --> 00:07:49,640 Speaker 1: big multinational company, the SEC rules are now what they are, 129 00:07:49,960 --> 00:07:54,240 Speaker 1: California's rules, Europe's rules are significantly stricter. How is this 130 00:07:54,320 --> 00:07:58,040 Speaker 1: supposed to work if you have to answer to multiple jurisdictions. 131 00:07:57,640 --> 00:08:02,400 Speaker 3: Kaylee, It's a very good question. They have different authorities. 132 00:08:02,760 --> 00:08:06,520 Speaker 3: We're securities regulator. Your A passes a law through their 133 00:08:06,520 --> 00:08:10,600 Speaker 3: European parliament that had a goal to manage the environment. 134 00:08:11,040 --> 00:08:16,000 Speaker 3: California similarly through their legislation. That's not what we do. 135 00:08:15,760 --> 00:08:21,240 Speaker 3: We stay within our We stay within our chalk lines, 136 00:08:21,240 --> 00:08:21,720 Speaker 3: if I can. 137 00:08:21,720 --> 00:08:28,560 Speaker 1: Use tennis, staying within the SEC's chalk lines. Despite conversations 138 00:08:28,560 --> 00:08:31,119 Speaker 1: that you're having today around climate risk, you also, i'm sure, 139 00:08:31,520 --> 00:08:33,920 Speaker 1: as a five member commission and as the staff, are 140 00:08:33,960 --> 00:08:35,920 Speaker 1: going to be considering in recent months because you are 141 00:08:36,800 --> 00:08:39,480 Speaker 1: facing a deadline coming up in May around a spot 142 00:08:39,520 --> 00:08:45,120 Speaker 1: ethereum etf is, Kaylee, do you have to ask this question? 143 00:08:45,640 --> 00:08:47,280 Speaker 1: Of course, we are now about two months into a 144 00:08:47,320 --> 00:08:50,080 Speaker 1: world in which spot bitcoin products exist. They have had 145 00:08:50,160 --> 00:08:53,520 Speaker 1: incredible demand, more than eight billion dollars in inflows. Now 146 00:08:53,520 --> 00:08:56,719 Speaker 1: the optimism is ether spot ETFs are next. Do you 147 00:08:56,800 --> 00:08:58,640 Speaker 1: not first have to settle the question as to whether 148 00:08:58,640 --> 00:09:01,800 Speaker 1: Ether is a security or a commodity. Can you answer 149 00:09:01,880 --> 00:09:02,400 Speaker 1: that first? 150 00:09:02,520 --> 00:09:07,120 Speaker 3: Well, Kayley, again, on any one of these crypto tokens, 151 00:09:07,240 --> 00:09:11,640 Speaker 3: is about the facts and circumstances as to whether the 152 00:09:11,679 --> 00:09:15,000 Speaker 3: investing public is anticipating a profit based on the efforts 153 00:09:15,000 --> 00:09:18,440 Speaker 3: of others. But we do have filings in front of us. 154 00:09:18,960 --> 00:09:21,640 Speaker 3: I'm not going to comment. I will say this, this 155 00:09:21,679 --> 00:09:25,199 Speaker 3: is a highly speculative asset class. One could just look 156 00:09:25,240 --> 00:09:28,640 Speaker 3: at the volatility of bitcoin in the last few days. 157 00:09:28,720 --> 00:09:32,920 Speaker 3: And I grew up loving roller coasters. Maybe in my 158 00:09:32,960 --> 00:09:35,240 Speaker 3: adult years I don't write them as much, but you 159 00:09:35,720 --> 00:09:39,160 Speaker 3: really should be conscious as the investing public that this 160 00:09:39,240 --> 00:09:42,680 Speaker 3: is a bit of a roller coaster ride on these 161 00:09:42,760 --> 00:09:48,120 Speaker 3: volatile assets. And then the question is is how firm 162 00:09:48,240 --> 00:09:50,760 Speaker 3: is the foundation of that You know, you get to 163 00:09:50,800 --> 00:09:54,160 Speaker 3: the top of that hill, how's the foundation underneath it 164 00:09:54,240 --> 00:09:57,000 Speaker 3: and a other cash flows or what's the use case 165 00:09:58,120 --> 00:10:01,840 Speaker 3: for thousands of these tokens. There's about fifteen or twenty 166 00:10:01,920 --> 00:10:06,000 Speaker 3: thousand of them. They also may be securities because the 167 00:10:06,120 --> 00:10:10,720 Speaker 3: investing public is relying on the efforts of some group 168 00:10:10,760 --> 00:10:13,040 Speaker 3: of entrepreneurs in the middle of these projects. 169 00:10:13,120 --> 00:10:15,440 Speaker 1: Would you consider Ether as part of that group that 170 00:10:15,520 --> 00:10:16,319 Speaker 1: may be securities. 171 00:10:16,400 --> 00:10:19,640 Speaker 3: I understand you're asking the question, but again I'm going 172 00:10:19,679 --> 00:10:20,800 Speaker 3: to defer on that question. 173 00:10:21,000 --> 00:10:23,520 Speaker 1: All right. SEC Chairman Gary Gensler, thank you so much, 174 00:10:23,520 --> 00:10:26,760 Speaker 1: as always for giving Bloomberg Television and radio your time.