The Securities and Exchange Commission’s public company climate disclosure rule fits within the agency’s authority and the legal challenges seeking to overturn it are misguided, the SEC said in a court filing.
Congress gave the SEC “express statutory authority to require disclosure as ‘necessary or appropriate in the public interest or for the protection of investors,’ the agency said in an Aug. 6 filing in the 8th U.S. Circuit Court of Appeals in St. Louis, referencing the Securities Act of 1933 and the Securities Exchange Act of 1934. “Consistent with 90 years of disclosure-based regulation, the commission exercised that and other rule-making authority to promulgate the climate-related risk disclosure rules.”
The SEC finalized its climate disclosure rule March 6, requiring public companies to divulge a host of climate-related information in their periodic reports and registration statements. After nine lawsuits were filed against the rule, all challenges were combined to be heard by the 8th Circuit on a consolidated basis.
The agency in April halted implementation of the rule pending the legal challenge.
The plaintiffs, which include the energy companies, Republican attorneys general and business groups, claim the SEC doesn’t have the authority to issue such a rule, that the rule is arbitrary and capricious under the Administrative Procedure Act, and also violates the First Amendment by effectively mandating discussions about climate change.
In its brief, the SEC said climate-related risks — and a public company’s response to those risks — can significantly affect a company’s financial performance and position, which is why such a rule is needed.
“Contrary to petitioners’ arguments, the commission promulgated the rules not to influence companies’ approaches to climate-related risks or to protect the environment, but to advance traditional securities-law objectives of facilitating informed investment and voting decisions,” the SEC said.
Later, the agency added, “In challenging these rules, petitioners attack a strawman. This case is not about climate change or environmental policy; it is about protecting investors.”
