Lawmakers and think tanks back SEC climate disclosure rule in court

A raft of US lawmakers and sustainability-related think tanks have filed amicus briefs in the Eighth Circuit Court of Appeals to defend the Securities and Exchange Commission’s climate disclosure rule against legal challenges seeking to invalidate it.

The amicus briefs were filed last week at the Eighth Circuit Court of Appeals – where the SEC is facing a consolidated legal challenge from at least nine different conservative-leaning states and business groups trying to prevent the implementation of its climate disclosure rule.

“Petitioners would have the Court believe that the SEC is trying to regulate climate change or greenhouse gas emissions via the instant rulemaking. Nothing in the instant rule regulates climate change or greenhouse gas emissions. What the rule does require is the disclosure of climate-related risks. Petitioners are devoted to denying those risks, and so oppose the reporting of them by fiduciaries. But the risks are real,” a group of Democrat lawmakers including Sheldon Whitehouse, Brian Schatz, Sean Casten and Juan Vargas  argued in one of the briefs. 

In another, California Attorney General Rob Bonta urged the court to reject the petition to review, noting that “the SEC’s climate disclosure rule will provide the transparency needed to enable Americans to make informed investment decisions, which in turn will strengthen our economy.”

The state of California is set to implement its own – much more stringent – climate disclosure rules in the next couple of years, even if Governor Gavin Newsom’s proposed delay is accepted.

SEC climate disclosure rule necessary for carbon market integrity

Another amicus brief was filed by the Clean Air Task Force (CATF), a US non-profit promoting policy and technology changes to reduce emissions, which argued that the SEC’s requirement to disclose carbon offset use would be beneficial to the market.

“A company aiming to reduce its greenhouse gas emissions has two main strategies: cutting emissions or offsetting them,” said Kathy Fallon, Land Systems Director at CATF. “When they choose to rely on carbon credits to counterbalance emissions, that introduces financial, reputational, and regulatory risks. The SEC’s requirement for offset disclosures is essential for investors to evaluate those risks.” 

CATF added that disclosing carbon offset use would incentivise companies to seek higher-quality carbon credits – a priority for the US government, which earlier this year released a statement of policy in support of a high-integrity voluntary carbon market.  

Climate rule challenges ‘suffer from fundamental flaws’ 

In yet another brief, the Institute for Policy Integrity, an NYU School of Law think tank, goes after the petitioners’ argument that the rules would represent unnecessary costs for businesses. 

“Much of corporate America already provides or will soon provide climate-related disclosures, either voluntarily or to comply with mandatory disclosure laws in other jurisdictions. For many public companies, these baseline disclosure practices make the costs attributable to the rules far lower than they otherwise would be. The petitioners’ failure to acknowledge these practices undermines their criticisms of the rules’ costs,” the organisation noted.

In addition, the economic argument fails to recognise the rule’s incremental benefits for investors and companies that will obtain greater access to capital, it added.

Earlier in August, the SEC filed its own brief with the court, arguing that the climate disclosure rule’s only goal is to protect investors – and as such, falls within its authority.

“Petitioners charge the Commission with exceeding its statutory authority by acting as an ‘environmental guardian’, and seeking to ‘pressure’ public companies to ‘alter their environmental policies and activities’. But this ignores that the Commission expressly acted to promote core securities law objectives, not regulate the environment,” it said.