SEC to Vote on Climate Disclosure Rules

A few states and public interest groups, as well as New York City, asked the Securities and Exchange Commission in 2007 to require greater disclosure about climate-related risk. This may soon be their reality.

Yesterday’s SEC notice stated that the agency will be voting on whether to amend registrants to improve and standardize disclosures about climate for investors. Voting will occur on Monday, 21 March.

Gary Gensler (SEC Chair) is a proponent of increased disclosure. They argue such disclosures are essential to make sure investors are fully informed about the potential risks that climate change and policies pose to their investments and to accurately reflect climate-related risk in share prices. Some critics question the distinction between climate risk and other policy-related, broad or systemic risks that warrant the need for specific disclosure requirements. Some question whether disclosures relating to climate are subject to the exact same legal standards of accuracy as traditional financial disclosures. Last year, I moderated a webinar (embedded below) exploring these questions featuring Professors Madison Condon (BU) and Kevin Haeberle (W&M) for the Coleman P. Burke Center for Environmental Law at Case Western Reserve University.

Interesting is the timing of SEC’s decision, given the Supreme Court’s still-pending decision. West Virginia v. EPA The SEC could lose its authority to make climate disclosures more extensive and there would be a greater risk for litigation if a new disclosure obligation was made. If the Supreme Court decides that Section 111 can be used to authorise traditional polluting measures at specific facilities and not wider system-wide changes in the power sector then parallel arguments could be raised against the SEC’s existing authority to require greater climate disclosures. The former would require legislative approval if it is a major question that is subject to regulatory change.