Rupert Darwall collected some of the most prominent comments made on the SEC’s proposed climate-related risk disclosures rule, highlighting many of the arguments in support of and opposition to the proposed rule. Darwall explains:
Much comment on the controversial climate disclosure rule proposed by the Securities and Exchange Commission (SEC) has centered on whether the SEC has the necessary legal authority. By the end of the comment period on June 17, the SEC had received more than 3,400 letters, significantly more than usual. Linked to legal arguments on whether the SEC has an adequate statutory—or, indeed, constitutional—basis for its climate proposal is the question of pretextuality: Is the SEC being genuine in the stated justification for its sweeping climate disclosure rules? Should the SEC harbor doubts about its legal standing to compel climate disclosures—notably, greenhouse gas emissions data—from listed companies, it increases the likelihood that it will advance a public justification for the proposed rules that differs from its real one so that it better fits within its statutory authority.
Among the comments Darwall highlights are those made in the letter sent by Boyden Gray & Associates.
At the heart of the SEC proposal is the disclosure framework developed by the Taskforce on Climate-related Financial Disclosures (TCFD), which is to form the basis of the SEC’s climate disclosure regime. In their comment letter, Boyden Gray & Associates (BG&A) note that the TCFD, referenced 243 times in the SEC proposal, was created, funded, and directed by Michael Bloomberg, whose company intends to develop proprietary tools to become “the financial industry’s first port of call for ESG information” and generate billions of dollars in revenues for companies to comply with the SEC’s proposed disclosure requirements. “The proposed rule is a glaringly clear example of pay-to-play politics and self-dealing,” comment BG&A. “This type of behavior is decidedly not in the ‘public interest.’”
Darwall explains that this origin is important to understanding how the rule works. “The proposed rule on greenhouse gas disclosures makes sense only in terms of the SEC’s undisclosed rationale—specifically, to facilitate investor and climate activist pressure on listed companies to cut their greenhouse gas emissions, and not the SEC’s pretextual one of such disclosures being proxies for climate risk.” He concludes by pointing to the BG&A letter to explain the consequences of this pretext:
. . . even if the SEC’s proposed rule is otherwise valid, it would still be unlawful because the SEC provided a contrived basis for the rulemaking. [BG&A’s] letter quotes the June 2019 opinion of the Supreme Court in the Department of Commerce v. New York that threw out the citizenship question from the 2020 census: “Our review is deferential, but we are ‘not required to exhibit a naïveté from which ordinary citizens are free.’ ” For the courts to swallow the SEC’s pretextual rationale would require generous levels of credulity and sustained suspension of disbelief. Ordinary citizens are apt to employ the duck test: if it looks like a duck, swims like a duck, and quacks like a duck, then it probably is a duck. The SEC climate proposal is a duck.