In March 2024, the Securities and Exchange Commission (SEC) finalized its rules on The Enhancement and Standardization of Climate-Related Disclosures for Investors (Rules). The Rules will require public companies in the United States to make certain climate-related disclosures in their registration statements and annual reports, giving investors critical information to better balance risk in their portfolios. Immediately following the Rules’ release, industry actors and a coalition of states filed lawsuits seeking to vacate the Rules. We filed an amicus brief in the Eighth Circuit, supporting these important Rules. Our brief argues that the petitioners’ economic arguments about the Rules’ costs and benefits suffer from fundamental flaws.
First, our brief asserts that the petitioners ignore baseline disclosure practices—disclosures public companies will provide regardless of the Rules. Much of corporate America already provides or will soon provide climate-related disclosures, either voluntarily or to comply with mandatory disclosure laws in other jurisdictions. For many public companies, these baseline disclosure practices make the costs attributable to the Rules far lower than they otherwise would be. The petitioners’ failure to acknowledge these practices undermines their criticisms of the Rules’ costs. At the same time, our brief further contends that the petitioners fail to recognize the Rules’ incremental benefits. The Rules benefit investors by providing them with more consistent, comparable, and reliable climate-related disclosures. The SEC properly assessed these benefits qualitatively and determined that they justified the costs of the Rules.
Second, our brief rebuffs the petitioners’ arguments that the SEC failed to engage with a study that purportedly showed that climate-related disclosures are immaterial (meaning a reasonable investor would not find the information useful in making decisions). In fact, the SEC did engage with the study, and regardless, the study was of limited relevance and focused on only a small subset of the Rules’ requirements. The SEC did not need to point out these limitations to avoid vacatur.