The legal arguments advanced by the State Attorneys General are substantial. Ultimately, any determination of the legality of mandated disclosures by the SEC will likely depend on both (i) the substance of required disclosures and (ii) the justification that the SEC can demonstrate for mandating those disclosures. Put differently, it is likely not the case that the SEC would be able to mandate disclosures on a topic merely because the topic was of public interest, and without regard to a demonstration that it was of economic consequence to investors.
Current SEC leadership may be hoping to "win" any argument over the materiality of climate disclosures by generating a flood of public comments from retail investors touting the importance of such disclosures. It will be interesting to see if various States attempt to fight fire with fire; that is, whether States will assert that the SEC is pushing a regulatory agenda that hurts State economies and costs jobs. Perhaps those States may seek to generate public comment at the rulemaking stage, and then, perhaps, challenge the SEC before the courts.