SEC Votes to End Defense of Climate Disclosure Rules
Commentary by Steven Lofchie
The SEC voted to end its defense of the rules requiring disclosure of climate-related risks and greenhouse gas emissions. The rules created a detailed and extensive special disclosure regime about climate risks for issuing and reporting companies.
According to the agency press release, the SEC staff "sent a letter to the court stating that the Commission withdraws its defense of the rules and that Commission counsel are no longer authorized to advance the arguments in the brief the Commission had filed. The letter states that the Commission yields any oral argument time back to the court."
SEC Commissioner Caroline A. Crenshaw criticized the SEC's decision to withdraw from defending the rule in court. She argued that the rule was developed through a rigorous, years-long process and that abandoning its defense is both unlawful and politically motivated. Ms. Crenshaw accused the SEC of sidestepping the Administrative Procedure Act by effectively allowing the rule to be dismantled without proper legal processes. She urged the SEC to either defend the rule or formally revise it through appropriate procedures, warning that the current approach undermines good governance and policymaking.
Commentary
While it is no surprise that Commissioner Crenshaw bemoans the death of the climate disclosure requirements, given that she voted for their imposition, there is likewise no surprise that these requirements were not going to survive the change in Administration. There is no reason that the SEC should waste its resources seeking to defend the challenged rules.
Under the prior administration, the SEC had a very bad record in defending its rulemakings in court against claims that they violated the Administrative Procedure Act. There is very little reason to believe that the climate disclosure rules would have survived such a challenge. At the time they were proposed, both Commissioner (now Acting Chair) Uyeda and Commissioner Peirce asserted these legal deficiencies as well as arguing that the requirements were bad policy. See a compilation of news items on their statements. It's a little difficult to see how the SEC could defend the rules now, when its current leadership is on record as denouncing both the rule and the process by which it was adopted.
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