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When we last checked in on the litigation over the SEC’s climate disclosure rule, the SEC had indicated that, if the rule survives litigation, it would provide a new implementation period for companies to come into compliance. Now things are heating up on the docket, with both sides submitting their briefs (along with many “intervenors”). Based on the calendar, most briefs should be in by now, with the petitioners’ response due mid-September.

This blog from Cooley’s Cydney Posner recaps the SEC’s key arguments in support of its authority to adopt the rule. Here’s an excerpt:

The SEC maintains that its “approach to climate-related information has been consistent with its longstanding interpretation of its statutory authority: the Securities Act and the Exchange Act authorize the Commission to mandate disclosures that protect investors by facilitating informed investment and voting decisions.” Each disclosure requirement in the rules is designed to elicit information with that goal and is therefore “necessary or appropriate in the public interest or for the protection of investors.” For example, the requirements to disclose Scope 1 and Scope 2 GHG emissions are a central measure of exposure to transition risk, one of the business and financial risks facing companies. Consequently, the SEC argues, the information is elicited is “necessary or appropriate in the public interest or for the protection of investors” and within the SEC’s authority.

Petitioners’ arguments, the SEC contends, set up a “strawman—challenging reimagined rules that the Commission did not enact and criticizing a rationale that the Commission expressly disclaimed.” Contrary to petitioners’ arguments, the rules were adopted “to advance traditional securities-law objectives of facilitating informed investment and voting decisions,” not to “influence companies’ approaches to climate-related risks or to protect the environment.” As reflected in the extensive factual record, the rules respond to “changed facts, including subsequent market and regulatory developments,” such as the current importance of climate-related risk information to investor decision-making and investor interest in detailed, consistent and comparable information. In adopting the rules, the SEC emphasized that they “do not ‘determine national environmental policy or dictate corporate policy,’” and emphasized that it “is ‘agnostic as to whether and how issuers manage climate-related risks so long as they appropriately inform investors of material risks.’” In addition, the rules “do not ‘prescribe any particular tools, strategies, or practices with respect to climate-related risk.’”

The blog also summarizes the Commission’s response to challenges under the Administrative Procedure Act and the First Amendment. As I mentioned, there are a lot of amicus briefs on both sides – here is one from 17 First Amendment scholars that defends the rule. Here’s a summary of their arguments:

The Knight Institute’s amicus brief, filed in support of the rule, makes four arguments. First, securities disclosure requirements that inform and protect investors do not ordinarily raise First Amendment concerns. Second, the climate disclosure rule falls within this longstanding tradition of securities disclosure requirements. Third, at most, the rule should be evaluated under the framework that the Supreme Court established in Zauderer v. Office of Disciplinary Counsel of the Supreme Court of Ohio, 471 U.S. 626 (1985). Finally, the rule survives Zauderer’s scrutiny.

It’s anyone’s guess what will happen to this rule, but there’s a chance that the court’s decision will be a mixed bag. The SEC acknowledges that possibility in its brief. Cydney notes:

While the SEC urged the court to agree with its conclusions that all of petitioners’ challenges fail, if the court were to determine otherwise, the SEC requests the court to remand, not vacate, and to sever any provision that the court determines to be unlawful.

– Liz Dunshee