Lawmakers spar over prospects for SEC’s climate disclosure rule

Securities and Exchange Commission (SEC) new “Climate information disclosure” rules This was the latest flashpoint in the Republican fight against government overreach at a House hearing Thursday.

Republicans say the rule not only poses a threat to businesses, but would be struck down in court, with the Supreme Court saying this week it would restore authority to federal agencies. Democrats argue that the SEC protects investors and is not subject to restrictions that may soon be imposed on other government agencies.

The SEC aims to require publicly traded companies to report all emissions generated through their business supply chains and partners, in addition to direct and indirect emissions. In addition, companies will be required to detail the “actual or likely material impact” of climate change on their business strategy and their plans for cleaner energy.

Republicans think the SEC is out of line.

“Congress has not delegated to the SEC the authority to require disclosure of climate change information,” said Rep. Bill Huizenga (R-Mich.), chairman of the House Financial Services Oversight and Investigations Subcommittee.

Mr. Huizenga's Republican colleagues believe that courts will continue to constrain the agency's rule-making ability after West Virginia v. EPA, a landmark Supreme Court case that limited the agency's ability to limit emissions. He showed his perspective.

Lawrence Cunningham, a professor emeritus at Georgetown University and special counsel at the law firm Mayer Brown, called the SEC's proposed rule an “undemocratic power grab” in his witness testimony, saying West Virginia v. E.P.A. He agreed with Republicans to invalidate the rule.

Cunningham said the Supreme Court “will be careful that the executive branch does not exceed the authority given to it by Congress.” He went on to say that while Americans “need the SEC's protection,” the SEC is empowered to protect investor interests, not climate protection.

But Democratic lawmakers, such as Rep. Rashida Tlaib (D-Mich.), argue that a 1979 D.C. Circuit Court of Appeals ruling requires the SEC to “promulgate rules requiring more information than is specifically required by statute.” It pointed out that the government had “broad discretion whether or not to promulgate the law.” ”

As Tlaib pointed out, the SEC's ability to adjust disclosure requirements for publicly traded companies has never been challenged by a court in its 90-year history.

At the beginning of the discussion, Huizenga suggested that Congress wait for further consideration by the Supreme Court of Chevron deference (a policy that defers to agency interpretation of ambiguous statutes) in order to properly understand agencies' rulemaking authority. I admitted that there was.

In the SEC's case, the language used by the D.C. Court of Appeals in its decision exacerbates that uncertainty.

The so-called climate disclosure rule asserts that climate change poses significant risks for companies that impact investors, providing necessary validation for SEC action.

George Georgiev, an associate professor at Emory University School of Law and a witness at the hearing, said the “disclosure regime” is a “hallmark” of successful markets and that the SEC's updated disclosure requirements are a legitimate “coordination and process.” said. Aligned with economic realities.”

“Just because the issue has to do with climate change, we are not working with the EPA. [National Oceanic and Atmospheric Administration] You can touch it,” he said. “Every agency in the federal government needs to provide affordances for climate change.”

Congressman Sean Kasten (D-Ill.) pointed out that large corporations are retreating from areas that are directly affected by climate change, and that the cost of climate-related disasters has been found to be The National Oceanic and Atmospheric Administration survey $617 billion from 2018 to 2022. Kasten also cited the 2022 survey results. environmental resource managementfound that the average company spends $500,000 a year assessing the risks to its operations.

“This hearing is really about protecting investors' right to access information, or protecting companies' right to withhold information from investors,” Kasten said.

The survival of the SEC's climate disclosure rules could predict the fate of other efforts by the Biden administration to use the SEC to meet climate change goals.