Continuing this week’s series of questions for the Securities and Exchange Commission (SEC) on the recent rule proposal to enhance and standardize climate-related disclosures for investors:

Did anyone ask retail investors?

The SEC and its commissioners and senior officers are always at great pains to signal their solicitousness toward the “retail investor,” or “Mrs. & Mr. 401k,” as former Chairman Jay Clayton enjoyed saying. Yet the section of the proposing release entitled “The Growing Investor Demand for Climate-Related Risk Disclosure and Related Information” is entirely silent as to whether and to what extent the proposal stands to benefit retail investors, or even whether the ordinary investor cares one way or the other about, inter alia, Scope 3 greenhouse gas emissions. (A recent survey of investor sentiment conducted by FINRA would seem to provide some evidentiary support for the notion that investors do not care all that much just yet.)

A Ctrl‑F search of the release reveals that the phrase “retail investor” occurs but three times across 140 pages, twice in the footnotes and once in a glancing reference in the cost-benefit analysis section. Rather, the release focuses on what “major institutional investors, which collectively have trillions of dollars in investments under management” are perceived by the SEC staff to desire, which is a rather different matter. Indeed, a major front in the debate over “environmental, social, and governance” policy in general has been whether major institutional investors (including pension funds) are ignoring the economic interests of their investors in pursuit of their own management’s quixotic ideological programs or the (arguably) extraneous concerns of “stakeholders.” Whatever the merits of this claim, the SEC staff will expose the rulemaking to litigation risk if they simply ignore this issue and base their evidence for what the “reasonable investor” expects on the views of major asset managers alone.

Institutional investors and their prerogatives are well-represented and well-articulated in any SEC rulemaking process, as is appropriate. It is, however, decidedly odd—and quite out of character—for the SEC flatly to ignore retail investors in a disclosure rulemaking of this magnitude.

In case you missed it, click here for part 1 of the impromptu questions.