June 30, 2022

SEC’s Climate Disclosure Proposal: Avalanche of Comments at Deadline

The comment period for the SEC’s climate disclosure proposals expired on June 17th. Not surprisingly, the agency was the recipient of an avalanche of last-minute comments.  I waded through a bunch of these late arrivals and grabbed a handful that I thought were particularly interesting or significant. These include:

– A 94-page letter from the Society for Corporate Governance offering a critique of most of the specific rule proposals and calling into question the SEC’s authority to adopt the rules.  Of particular note are appendices criticizing the Public Citizen survey data on retail investors’ desire for climate change disclosure cited by the SEC in the adopting release & providing data on Society members’ estimates of compliance costs.

– A 35-page letter from the ABA’s Federal Regulation of Securities Committee addressing specific issues relating to proposed S-K line-item disclosures and calling into question the workability of the SEC’s proposed financial statement disclosure requirements.

– A 6-page letter opposing the proposed rules submitted by a group of former SEC Chairs & Commissioners led by Richard Breeden and Harvey Pitt.  Liz previously blogged about another group of former SEC bigshots who wrote in support of the SEC’s authority to adopt the proposal. These worthies disagree, characterizing the proposed rules as “an unprecedented and unjustified effort beyond financial materiality” that exceed the SEC’s statutory authority.

– A 21-page letter arguing that the proposed rules don’t violate the First Amendment from a group of 6 law professors led by Harvard Law School’s Rebecca Tushnet.

– A 30-page letter arguing that the SEC lacks the statutory authority to adopt the proposed rules submitted by Bernard Sharfman & James Copland. This letter responds to those commenters who argue that the SEC has almost limitless statutory authority to issue disclosure rules “in the public interest.” The authors argue that the SEC’s authority is somewhat more limited and contends that courts have construed this “in the public interest” language more narrowly & by reference to the objective of protecting investors.

In addition to this list, I’d like to highlight this 51-page letter submitted by a group of six commenters including former Corp Fin Director Alan Beller and former Delaware Chief Justice Leo Strine. This letter is probably the most constructive critique of the proposal that I’ve seen. Among other things, that letter recommends that the SEC make Scope 3 disclosure voluntary, delay implementation of the attestation requirement and consolidate proposed Items 1501-1503 of Reg S-K into one more concise MD&A-like item that is less prescriptive, less redundant and more focused on materiality. They even attach their proposed rewrite of those line items.

The Staff will wade through all of the submitted comments as part of finalizing the climate disclosure rule and crafting an adopting release for the Commissioners to approve. SEC Chair Gary Gensler wants to take action before year-end. If you expect to be involved in drafting your company’s climate disclosure – or will be helping gather and prepare emissions data for it – join on July 13th for a “Climate Disclosure Event” that will provide practical steps that you need to take now to be ready, and “lessons learned” from drafting our model disclosures.

To make this event an even bigger value, attendees are eligible for $100 off our 1st Annual Practical ESG Conference AND $200 towards an annual subscription to! Email or call 1-800-737-1271 to claim this offer.

Register today for this FREE event, and please share it with anyone on your team or in your network who may be interested. That includes ESG, Sustainability & Impact Officers, Environmental Health & Safety Officers, Investor Relations & Public Relations professionals, in-house and outside counsel who are advising boards or preparing disclosures, and anyone involved with ESG strategies and disclosures.

John Jenkins