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April 13, 2022

Is the SEC the Wrong Tool for the Right Job?


The SEC has changed the climate risk disclosure landscape.

Its March 21 announcement of proposed mandatory disclosure requirements is encouraging for anyone concerned about climate change. But the path ahead is far from clear. We’re almost at the halfway point of the 60-day public feedback period (it ends May 20) and there’s been pushback—a myriad of questions and objections (many very good) from companies impacted by the announcement.

In my view there are three camps:

  1. True Believers
    Those who, like chairman Gensler, believe firmly that climate change poses a real and material threat to financial stability, and that these rules are well within the scope of the SEC’s mandate.
  2. Willing Activists
    Those who believe that, though these rules may be a stretch for the SEC’s mandate (and acknowledge that empirical evidence for financial instability is weak), yet still think that we should use every tool at our disposal to shift capital away from carbon-intensive investments.
  3. Grumpy Economists
    Those who, like John Cochrane, don’t deny climate change is a problem, but feel the regulatory levers of the financial system are the wrong tools for the job. This is a pragmatic and clear-headed view that should be seriously considered (without derision).

I’m sure some folks remain foolish enough to deny climate change is a problem, but those people do not get to come to my camp.

I’m somewhere in between Camp 1 and Camp 2. I’ve read the research showing limited impacts of climate risks on the financial system, and having worked in a bank myself, I know that they have, to date, been largely insulated from weather-related damages. But I’ve also read the recent IPCC reports and acknowledge that the Lucas critique is very much in play. Both climate change and our reactions to it are incredibly uncertain. I am loss averse, especially when the loss in question is all of civilization. I believe the past is, and forevermore will be, a poor predictor of future weather. So why not hedge our bets against the worst case scenario?

If you or your employer are, like me, in one of the first two camps, consider reaching out to Jupiter Intelligence. We have the tools to help ensure accurate assessments of risk and efficient portfolio re-allocations. If you’re in Camp 3 only, we have the tools to reduce the governance burden of these new regulations. In any case, I firmly believe Jupiter is the right tool for the right job.

Jupiter Intelligence is the global leader in climate analytics for resilience and risk management. For further information, please contact us at

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