The SEC’s Climate-Related Disclosure Rule has been proposed for over a year now. Many are expecting the final rule in October (although timing is uncertain) and litigation about the rule’s validity is a certainty. This has led to speculation on the rule’s chances before the Supreme Court. Administrative law has changed rapidly as the Supreme Court develops its “Major Question’s Doctrine.” Two cases – West Virginia v. EPA and Biden v. Nebraska – have hamstrung other federal agency efforts to advance programs the Court deemed to be beyond their grant of authority. Recent reporting from Forbes analyzes the proposed climate rule in light of these new developments:
“The major questions doctrine will come into play in the new Climate Related Disclosure rule. In the proposed rule, the SEC claimed they had authority to develop disclosure requirements that are ‘necessary or appropriate in the public interest or for the protection of investors.’
Further, the Commission stated, ‘Investors need information about climate-related risks—and it is squarely within the Commission’s authority to require such disclosure in the public interest and for the protection of investors—because climate-related risks have present financial consequences that investors in public companies consider in making investment and voting decisions.’”
Not only is SEC’s jurisdiction a potentially open question, this new memo from Cooley’s Cydney Posner adds the issue of timing of a lawsuit:
“If a climate disclosure rule is adopted this year, for example, any litigation that might be commenced shortly thereafter is unlikely to be resolved by 2025. If Republicans were to win the presidency in 2024 and take control of the SEC in January 2025, Bloomberg posits, a ‘Republican-led SEC would have the power to end its defense of the rule,’ although environmental organizations could step in to defend the rule.”
Considering the Court’s prior rulings in “Major Questions” cases and possible timing of a lawsuit, the SEC’s rule may have a slim chance of passing scrutiny. However, litigation around the rule will take substantial time to complete and rules like the EU’s CSRD will drag the largest multinationals into mandatory reporting regimes regardless of the fate of the SEC’s rule.
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