The Biden administration’s attempt to sneak through regulations that would fundamentally redefine business for the sake of its radical climate agenda almost worked. The Securities and Exchange Commission was a mere two weeks away from approving a new rule that would greenlight the New York Stock Exchange’s request to list a radically new class of company known as a “natural asset company,” or NAC, on its exchange. But just before the holidays, the SEC fortunately relented under pressure from state financial officers and Congress, taking the proposal off the fast track and reopening the public comment period so that interested parties, now alert to the proposal, might weigh in and provide much-needed scrutiny.
Still, the NAC scheme remains far from dead. And now that it’s been exposed, the SEC needs to drive a stake through this dangerous proposal once and for all.
The investment vehicle was the ill-conceived brainchild of the Intrinsic Exchange Group, a far-left spinoff organization, and developed in partnership with the NYSE and the Rockefeller Foundation. Under the proposal, companies designated as publicly traded NACs would secure rights to public and private land use but would be “prohibited from directly or indirectly conducting unsustainable activities, such as mining, that lead to the degradation of the ecosystems it is trying to protect.”
Whereas conventional companies put land into productive use in order to earn a return for investors, NACs represent the antithesis of that model. Essentially, the whole reason for the NAC designation is to lock up land in perpetuity and sequester it from any development and most activities that benefit human well-being.
If creating a new class of companies that generate no economic value seems strange, the system used to measure “natural assets” is even more absurd. NACs would be permitted to assign a financial value to natural processes such as carbon dioxide absorption, water purification, and pollination. And select investors and governments would, theoretically, profit from that value, though it’s unclear how.
The framework would operate under a strange new accounting standard that would never meet the exacting, generally accepted accounting, or GAAP, principles, the same set of standards to which federal law requires all publicly traded companies to be held. In the SEC filing, they state, “A NAC’s activities are not well captured solely by traditional financial reporting standards like GAAP/IFRS.” That’s a fancy way of saying that traditional accounting standards would never allow for what they plan to do, so they’re inventing a new set of rules instead.
But don’t take my word for it. As the attorneys general of 25 states wrote in a letter to the SEC, this proposal “is a recipe for investment decisions based on guesswork and buzzwords.”
Yet the Biden administration has wholeheartedly embraced the idea as the private sector component of its so-called 30×30 initiative. This initiative calls for the permanent lockdown of at least 30% of America’s land and waters by 2030, ostensibly to achieve a net-zero emissions economy by 2050. Last year, the administration also announced a strategy to develop statistics to identify and quantify exactly the types of things from which NACs would profit.
As written, the rule would lay the ground for large swaths of federal lands, including national parks, to become part of untouchable NACs and grants. Even now, the administration is actively working to facilitate the transfer of federal lands to NACs’ authority by way of a new Bureau of Land Management rule that more than two dozen state attorneys general decried as fundamentally at odds with the bureau’s mandate to “manage public lands ‘on the basis of multiple use and sustained yield.’”
Taken together, the implications of these rules for states such as Nevada, where the federal government owns 80.1% of land, cannot be overstated. In Alaska, where the economy largely depends on natural resources, Uncle Sam’s land ownership is 60.5%.
The SEC needs to recognize that NACs are no more than social welfare organizations masquerading as investment vehicles. They create nothing of value, which is a basic requirement of the established securities laws they threaten to upend. By using investor funds to lock up assets in the pursuit of political goals, NACs pose an irresponsible threat to the American economy, our food and energy security, and indeed our national security.
The SEC has an obligation to protect the investing public. While the NYSE has just yesterday withdrawn its application for the policy change, the agency must live up to its responsibility by ensuring that no future version of this ill-conceived rule ever sees the light of day.
CLICK HERE TO READ MORE FROM THE WASHINGTON EXAMINER
Derek Kreifels is the CEO of the State Financial Officers Foundation.