The Volokh Conspiracy

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Climate Change

SEC to Vote on Climate Disclosure Rules

Companies may be required to provide broader climate-related disclosures to investors, but would such a requirement survive legal challenge?


In 2007, a handful of states, public interest groups and New York City asked the Securities and Exchange Commission to mandate broader disclosure of climate-related risks. They may be about to get their wish.

Yesterday the SEC posted public notice that it plans to vote on "whether to propose amendments that would enhance and standardize registrants' climate-related disclosures for investors." The vote will be held on Monday, March 21.

Advocates of expanded disclosure, including SEC Chair Gary Gensler, argue that such requirements are necessary to ensure that investors are properly informed of the risks climate change, and climate change policies, pose to their investments, and that climate-related risks are accurately reflected in share prices. Critics question whether climate risks are sufficiently distinct from other broad, systemic or policy-related risks to justify specific disclosure requirements. There are also questions as to whether climate-related disclosures could be held to the same legal standards for accuracy as are more 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.

The timing of the SEC's decision is interesting because the Supreme Court's pending decision in West Virginia v. EPA could well affect the SEC's authority to mandate broader climate disclosures and increase the litigation risk to any new disclosure requirement. Should the Supreme Court conclude that Section 111 of the Clean Air Act can only be read to authorize traditional pollution control measures on specific facilities, as opposed to broader system-wide changes within the power sector, parallel arguments could be made against the SEC's authority under existing law to mandate broader climate or other environmental disclosures. If the former shift in regulatory authority is the sort of "major question" that requires legislative approval, it would seem the latter is too.