The US Securities and Exchange Commission (SEC) is insisting that it has the legal authority to issue climate disclosure rules based on the authority given to it by the US Congress through the Securities and Exchange Act.
The SEC stated its position in filings to the US 8th Circuit Court of Appeals on August 5 when it answered a consolidated legal challenge from multiple parties alleging that it has no authority to issue such climate disclosure rules. The SEC has postponed implementation of the rules, which have been challenged, since April although they were finalized one month before.
The SEC cited its mandate for investor protection granted to it by the US Congress under the Securities and Exchanges Act of 1934 as the basis for its authority to require disclosure of climate-related information.
In its filing, the SEC argues that the rule is within its authority as securities regulator based on the authority granted to it by the US Congress under the Securities Exchange Act of 1934. The securities regulator says that its decision to issue the new climate disclosure rule is in response to the need for “more detailed, consistent and comparable information” and “substantial investor demand”, citing investor feedback requesting climate-related information to help them make more informed investment and voting decisions.
“Each provision of the rules falls within the commission’s statutory authority and is consistent with the commission’s decades of practice exercising its delegated rulemaking authority,” the SEC states in its filing. “Petitioners’ contrary arguments misapprehend the relevant statutes and mischaracterize the rules.”
However, Bernard Sharfman, research fellow with the Law & Economic Center at George Mason University’s Antonin Scalia Law School, notes, there is no language in the originally enacted Securities Exchange Act of 1934 that refers to climate-related disclosure.
“Such disclosures were on no one’s radar at the time,” Sharfman says in a blog post at the Federalist Society newsletter dated May 25 2024. “But what may be surprising is that no language to that effect was added to the acts as they have been modified with various amendments over the past 90 years.”
The parties challenging the regulator’s authority, according to Legal Dive, a trade publication for in-house counsels of US corporates, include 25 US states, an energy trade association, two think-tanks, the US Chamber of Commerce and public oilfield services company Liberty Energy.