SEC Leans on Judicial Decision for Climate Disclosure Regulation, Legal Analysts reports
The US Securities and Exchange Commission (SEC) is seeking a court ruling on whether it had the authority to issue its climate disclosure rules, a move that has sparked debate among legal experts and commissioners.
The climate disclosure rules, passed by the previous commission, would require publicly traded companies to release information about their emissions. However, a majority of current commissioners believe that the SEC did not have the authority to issue these rules.
The group questioning the legal validity of the SEC's climate disclosure directive consists of Republican commissioners of the U.S. Securities and Exchange Commission (SEC). The SEC's lone Democrat commissioner, Caroline Crenshaw, has objected to the SEC's response, calling it unresponsive and accusing the commission of trying to avoid its legal obligations.
Crenshaw wrote that if the current commission wants to change the rules, it must go through an equally rigorous process as the original one. This process, under federal law, must follow a specific rulemaking process, and this is the agency's responsibility, according to Hanawalt.
The SEC's response to the court did not directly address whether it would uphold the climate disclosure rules if upheld in court. However, the SEC wrote in its response that a court decision would help it decide if a reconsideration of the rules is necessary.
Hana Vizcarra, a senior attorney at Earth Justice, states that if the current commission wants to change the rules, it needs to go through an equally rigorous process as the original one. Regardless of what happens with the rulemaking, the financial risks from climate change exist and it would be detrimental to the economy if investors do not have good exposure requirements in place, according to Vizcarra.
Legal experts find this situation unusual, as the SEC seems to be asking the court to do its work instead of going through the rulemaking process again. Cynthia Hanawalt, head of the Sabin Center for Climate Change Law's financial regulation practice, finds it unusual for a federal agency to invite a court to limit its own authority.
The impact of the court's ruling would depend on how specific it is, and it could potentially limit the SEC's ability to issue other rules, according to Hanawalt. If the court makes a decision on the commission's authority to issue a rule of this kind, it would be binding on any commission moving forward, according to Vizcarra.
The SEC moved to freeze the rule under US President Donald Trump. Regardless, the financial risks from climate change exist and it would be detrimental to the economy if investors do not have good exposure requirements in place, according to Hana Vizcarra.
