Legal questions related to SEC climate disclosure rule persist (2023)
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The SEC’s original climate reporting rule was first proposed in March 2022. Three months later, the U.S. Supreme Court issued its ruling in West Virginia v. Environmental Protection Agency, which raised questions about the SEC’s authority to issue the rule. Observers view the decision as one of the reasons for the delay in the release of the revised SEC rule:
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The U.S. Securities and Exchange Commission is expected to announce Climate Related Disclosure requirements in October 2023. Even before announcement, concerns are rising that the new rule could be outside the SEC’s authority and unable to sustain a legal challenge before the Supreme Court. … In March 2022, the SEC announced a proposed rule that would require certain climate related disclosures in initial filings and annual financial reports. … The proposed rule would require three levels of reporting from publicly traded companies. Scope 1 addresses direct greenhouse gas emissions of the company. Scope 2 addresses indirect GHG emissions from purchased energy. Scope 3, the most controversial, addresses GHG emissions from suppliers and end users of the product…. The legal debate over the SEC’s new rule fits into the broader discussion of the authority of administrative agencies. … In West Virginia v. Environmental Protection Agency, SCOTUS was asked to address the EPA’s ability to regulate greenhouse emissions relating to the Clean Air Act. In a 6-3 ruling, the Court held that the EPA had overstepped its authority. While the EPA did have some authority to create the new rules and there as ambiguity in the CAA on the issue, the Court found that the new rule was simply to economically and politically important to not be directly addressed by Congress. The major questions doctrine showed up again in Biden v. Nebraska, the case that stopped President Biden’s student loan forgiveness plan. In both cases, the Court did not say that the action could not be taken, simply that the only entity with the authority to take the action is Congress. Legal challenges to ERISA rule regarding the use of ESG in pension funds are using the same argument against the U.S. Department of Labor. The ultimate success of those challenges is unclear as legal scholars are still adjusting to how the Court applies the doctrine. The major questions doctrine will come into play in the new Climate Related Disclosure rule. In the proposed rule, the SEC claimed they had authority to develop disclosure requirements that are “necessary or appropriate in the public interest or for the protection of investors.” Further, the Commission stated, “Investors need information about climate-related risks—and it is squarely within the Commission’s authority to require such disclosure in the public interest and for the protection of investors—because climate-related risks have present financial consequences that investors in public companies consider in making investment and voting decisions.”[1] |
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See also
- Environmental, social, and corporate governance (ESG)
- Economy and Society: Ballotpedia's ESG newsletter
External links
Footnotes
- ↑ Note: This text is quoted verbatim from the original source. Any inconsistencies are attributable to the original source.
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