On June 25, 2024, thirty-five Republican legislators, including seventeen senators and eighteen representatives, filed an amicus brief in the Eighth Circuit Court of Appeals in support of the pending challenge to the SEC’s recently adopted climate disclosure rule (the “Climate Rule”). The brief advances two legal arguments: (1) that the Climate Rule constitutes “SEC[] overreach into climate regulation [that] does not respect the separation of powers and runs afoul of the major questions doctrine”; and (2) that “the Climate Rule deviates from the SEC's statutory mandate” “[b]y focusing on environmental impacts rather than financial materiality.”
Both of these legal arguments have already been featured in the various challenges to (and commentary on) the Climate Rule; however, the key point advanced by this brief is that it was filed by members of Congress who “recognize that Congress is the constitutionally appropriate forum for addressing the major policy questions addressed in the Climate Rule.” In other words, individuals representing the U.S. Congress (albeit only a relatively small portion thereof) have submitted a filing to a court arguing that the SEC Climate Rule contravened the separation of powers. The mere fact that members of Congress have made this argument is significant.
This action by members of the Republican Party also further evidences the deep partisan divide--one could even describe it as a chasm--concerning the propriety of mandatory financial disclosures concerning climate change. A coalition of Republican-led states has challenged the SEC Climate Rule, while a number of Democratic-aligned states have intervened in support of the SEC Climate Rule. Given the increasing salience of ESG concerns as a distinguishing political factor between the two parties, this division is unlikely to be bridged soon. This political instability with respect to climate disclosures--and ESG concerns more broadly--reinforces the need for companies to pay close attention to this rapidly evolving regulatory environment.
West Virginia v. EPA, 597 U.S. 697 (2022), underscores the requirement for clear Congressional authorization when agencies promulgate rules of significant economic and political consequence. . . . the SEC's Climate Rule lacks clear Congressional authorization. The SEC, as a securities regulator, is not empowered to impose sweeping climate-related regulations on publicly-traded companies. Congress has demonstrated historical reluctance to pass broad climate legislation, particularly legislation that would dramatically impact federal securities law disclosure requirements. The SEC’s overreach into climate regulation does not respect the separation of powers and runs afoul of the major questions doctrine, warranting the rule’s invalidation. . . . [A]s members of the United States Congress, Amici emphasize their full support of the legislative process and together recognize that Congress is the constitutionally appropriate forum for addressing the major policy questions addressed in the Climate Rule.
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