At his confirmation hearing in front of the U.S. Senate Committee on Banking, Housing, and Urban Affairs in March 2021, Gensler was asked by ranking member Sen. Patrick Toomey (R.-Pa.) about his fidelity to the concept of materiality as the baseline for corporate disclosure. Toomey posed a hypothetical question: If a company spends a financially insignificant amount of money on renewable electricity, would that be material and require disclosure?

Gensler drew on a definition of materiality developed by the Supreme Court that seeks to determine whether an item is significant to a mix of information that a reasonable investor would want to know. Gensler said he would look at the “total mix of information” before determining materiality, thereby avoiding the question that obviously bore on whether companies should have to report on climate change-related issues.

Toomey then raised another question to Gensler: Apple earned a revenue of $274 billion in 2020. If it spent $1 million on political issue ads, is that spending material requiring disclosure? The SEC is already looking at this issue, and Sen. Robert Menendez (D.-N.J.), also a member of the committee, noted later in the hearing that he would be reintroducing the Shareholder Protection Act that mandates disclosure of political spending. Gensler agreed that disclosure of political contributions “was something the Commission should consider.”

Menendez is only one of many congressional Democrats on both sides of the Capitol pushing bills on corporate reporting. At hearings in the House Financial Services Subcommittee on Investor Protection, Entrepreneurship, and Capital Markets a few days before Gensler’s confirmation hearing, members discussed eight separate bills to mandate some level of corporate reporting on climate-related risks.

On the one hand, Committee Chairman Rep. Brad Sherman (D.-Calif.) said, “I don’t want corporate reports loaded with green wash. I don’t want to turn the 10K into a telephone book.” On the other hand, he argued during the Senate confirmation hearing that climate change- and political contribution-related disclosures are material because “they represent a potential reputation risk with impact on earnings per share.”

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