Institutional investors, environmental groups defend SEC climate rule in amicus briefs

More than 15 institutional investors and several environmental groups filed amicus briefs Aug. 15 defending the SEC’s climate disclosure rule.

“This is exactly what Congress established the SEC to do: ensure that investors have the information they need to make informed investment and voting decisions,” wrote the group of institutional investors along with Ceres, a nonprofit sustainability advocacy group, in one of the briefs filed Aug. 15 in the 8th U.S. Circuit Court of Appeals in St. Louis.

The institutional investors include the $504.6 billion California Public Employees’ Retirement System, $337.9 billion California State Teachers’ Retirement System and the New York City Comptroller’s Office, among others. The New York City Comptroller serves as the fiduciary for the $270.5 billion New York City Retirement Systems.

The SEC rule, finalized in March, requires public companies to disclose an array of climate-related information in their periodic reports and registration statements. After the final rule faced nine lawsuits filed against it, the 8th Circuit agreed to hear all the challenges on a consolidated basis.

In April, the SEC voluntarily halted implementation of the rule pending the legal challenge, though the agency contended in an Aug. 6 brief that it has the authority to issue such a rule, and the legal challenges seeking to overturn it are misguided.

Those that have sued over the rule — which include energy companies, Republican attorneys general and business groups — argue that the SEC lacks the authority to issue such a rule and that the rule violates the Administrative Procedure Act, among other things.

However, institutional investors and Ceres said in their amicus brief that the agency acted reasonably when issuing the rule.

“More than 300 institutional investors, representing over $50 trillion in assets under management,” filed letters supporting the proposed rule, according to the brief, and the SEC took public feedback into consideration by making significant changes to the final rule.

The final version of the rule removed a controversial requirement originally included in the proposal, which would have mandated that companies disclose indirect emissions generated from their supply chain, known as Scope 3 emissions, if material, though smaller companies would have been exempt from the requirement.

Contrary to what several critics of the rule argued, the amicus briefs all contend that climate-related financial risks are legitimate and worthy of disclosure.

“Financial risks associated with climate change are significant and increasing for SEC registrants and their value chains, customers, and other stakeholders,” wrote the Center for Climate and Energy Solutions, We Mean Business Coalition, and World Business Council for Sustainable Development North America, in their own Aug. 15 amicus brief.

“While physical climate impacts pose financial threats to companies across the United States, the particular hazards and vulnerabilities vary across sectors and locations and from one issuer to another, necessitating issuer-specific information,” wrote several environmental organizations in another Aug. 15 amicus brief. Those organizations include the Sierra Club, Sierra Club Foundation, Americans for Financial Reform Education Fund, Environmental Defense Fund and the Natural Resources Defense Council.

Additionally, many businesses registered with the SEC “voluntarily disclose climate information to their shareholders and other investors that consider such information material,” the amicus brief states.

SEC Chair Gary Gensler has repeatedly said the rule is needed to bring “consistency” and “comparability” to disclosures that many companies make already.