The SEC Speaks--And Fails to Defend Mandatory Climate Disclosures

During the opening remarks of the two-day SEC Speaks Conference, Chairman Gensler failed to express any statement of support in connection with the SEC's recently promulgated rule on mandatory climate disclosures.  (Instead, his speech focused on a number of other topics, including clearinghouse rules and proposed regulations.)  In contrast, Republican SEC Commissioner Uyeda devoted the entirety of his speech to offering critiques of the SEC's newly enacted mandatory climate disclosure rule.

While most of Commissioner Uyeda's criticisms had been previously voiced on other occasions, certain legal arguments achieved greater prominence in these remarks.  In particular, Commissioner Uyeda emphasized the concept of materiality, noting that “[t]he significant changes in the final rule reflect a recognition that no disclosure rule that veers from materiality is likely to survive a court challenge,” and opining that “changes to selected portions of the rule text intended to mitigate legal risk do not necessarily convert a climate change activism rule to a material risk disclosure rule.”  There was also a focus on procedural concerns, including a potential violation of the Administrative Procedure Act due to “the failure to repropose the rule” since “the changes were so significant,”  and that “the fail[ure] to consider [the] rule's economic consequences [renders] the adoption of the rule arbitrary and capricious.”  Finally, Commissioner Uyeda compared the climate disclosure rule to the previously enacted conflict minerals rule (which was mandated by Congress), stating that “public companies and investors are stuck with a mandatory disclosure rule that deviates from financial materiality but fails to resolve the social purpose for which it was adopted.”  Each of these arguments should be expected to feature in the upcoming litigation in the Eighth Circuit concerning the legality of the SEC's climate disclosure rule. 

Still, the failure by Chairman Gensler and his fellow Democratic Commissioners to offer a robust public defense of the climate disclosure rule may simply reflect a shifting of priorities now that the rule has been enacted.  Notably, just a few days ago--on March 22, 2024--Chairman Gensler forcefully defended the SEC's climate disclosure rule at a conference hosted by Columbia Law School, where his entire speech advocated the concept of mandatory disclosures and stated that the SEC's climate disclosure rule “enhance[d] the consistency, comparability, and reliability of [climate-related] disclosures.”  Moreover, it is altogether possible that a speech on the second day of the conference might offer a rejoinder to the varied critiques of the climate disclosure rule.