Boyden Gray & Associates filed comments on the SEC’s proposed rule on “The Enhancement and Standardization of Climate-Related Disclosures for Investors” 87 Fed. Reg. at 21,334, arguing that the proposed rule would be illegal and unconstitutional.

The proposed rule, a part of President Biden’s broader climate and ESG agenda,  would significantly expand the scope of required disclosures for many publicly traded companies. The comment explains,

The volume and the scope of the information that the proposed rule seeks is breathtaking. Registrants would be required to disclose a panoply of “climate-related” information: “physical risks” from extreme weather; so-called “transition risks” posed by potential future climate policy;  a registrant’s own greenhouse gas (“GHG”) emissions—and often upstream supplier and downstream consumer emissions as well— to “assess a registrant’s exposure” to climate risks; and a “transition plan” where a registrant is forced to explain how they will reduce their disclosed risks by reducing GHG emissions.

The comment argues such disclosures are not actually intended to protect the companies from the risks of climate change, but to pressure companies to take action to combat climate change.

Because the proposed rule would force registrants to disclose data that is sheer guesswork under the best conditions and to disclose plans to reduce GHG emissions, whether financially prudent or not, registrants would find themselves stuck between a rock and a hard place. Either divest from unpopular fossil fuels or open themselves to private lawsuits over allegedly misleading climate-related disclosures, lawsuits made even more likely SEC’s other proposed rulemaking seeking to crack down on “greenwashing.” . . . This catch-22 is not an accident but by design. While the proposed rule purports to require climate-related disclosures to protect companies and investors from the risks of climate change, it is clear the disclosures’ true purpose is to protect the climate from risks posed by companies. The proposed rule has its roots in pressure from elite asset managers who wish to manipulate the capital market system to force companies to align their behavior with the political preferences of the elites.

The comment goes on to explain that pretextual reasoning is not the only flaw with the proposed rule.

In seeking to regulate the environment, the SEC would step beyond the statutory authority granted to it by Congress, trespassing on the Environmental Protection Agency’s (“EPA”) domain and exceeding any permissible interpretation of the Exchange Act under the Supreme Court’s major-questions doctrine. The proposed rule would far exceed the “materiality” standard for disclosures that the Supreme Court has found that the Securities Act and Exchange Act require. The proposed rule would be arbitrary and capricious for more than a dozen reasons, not least which being that it encourages substantial conflicts of interest and is based on gross misrepresentations of the facts of climate change. The proposed rule would violate the First Amendment by compelling controversial speech. And to top it all off, the proposed rule would run afoul of the nondelegation doctrine and the private nondelegation doctrine by seeking to give legal effect to the Paris Agreement’s climate goals despite those goals having never been approved by Congress, much less given binding effect.

The full comment is available here.