Friday, June 17, 2022

Cunningham: "Twenty-Two National Professors of Law and Finance Renew Request that SEC Withdraw Climate Disclosure Proposal"

Today's press release from Prof. Lawrence Cunningham states in part:

Twenty-two of the nation’s leading professors of law and finance today wrote the Securities and Exchange Commission (SEC) to renew their doubts about the agency’s authority to adopt a new far-reaching climate disclosure regime and to urge an immediate withdrawal of the proposal. Initially writing in response to the SEC’s proposed rule requiring U.S. public companies to create and disclose extensive information on greenhouse gas emissions, the professors submitted a public letter in April questioning the authority of a federal financial regulator to collect climate-related information and identifying numerous reasons the proposal may face a challenge in federal courts. Since then, the debate has been joined by a number of other professors who have submitted letters supporting the SEC's authority. In the letter filed today, the professors weigh these arguments and explain their contrary conclusion.

The full comment letter can be found here. A relevant excerpt:

[T]he clear purpose (and certain effect) of these disclosures is to give third parties information for use in their campaigns to reduce corporate emissions, regardless of the effect on investors…. Imposing substantial costs on some companies to prepare for a “potential transition to a lower carbon economy” that Congress has not and may never mandate will harm investors who prioritize financial returns over social goals…. As Commissioner Peirce’s dissenting statement put it, the Proposal will put the SEC’s weight behind “an array of non-investor stakeholders” demanding changes in company operations. We believe, however, that the SEC and the courts can and should consider predictable consequences when deciding whether the Proposal will protect investors and whether it involves a “major question” that Congress should decide. Only by ignoring the long and contentious history of debates over the appropriate policy response to climate change could one conclude that the Proposal is a mere “business as usual” tweak to the disclosure system.

UPDATED: Another worthwhile excerpt:

An analysis of the SEC’s authority to adopt the Proposal must grapple with the substantial differences between it and the 2010 Guidance. Here we find helpful a framework set out in the Coates Letter, which distinguishes disclosures about the impact of climate on a company with disclosures about the impact of a company on the climate. This is a simple rubric for separating disclosures focused on investor protection from those focused on social goals. The Proposal manifestly requires the second type of disclosure. A core element of the Proposal, one highlighted in the SEC’s Fact Sheet accompanying the Proposal, is disclosure of greenhouse gas (“GHG”) emissions. This is a quintessential measure of a company’s contribution to climate change. It is not a measure of the impact of climate change on the company.

Stefan J. Padfield | Permalink


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