The SEC’s Climate Disclosure Proposal: Critiquing the Critics
10 Pages Posted: 29 Mar 2022 Last revised: 30 Mar 2022
Date Written: March 27, 2022
The SEC released its long-awaited Climate Disclosure Proposal on March 21, 2022. The Proposal is expansive, the stakes are high, and, predictably, various critical arguments are being advanced in preparation for a potential court challenge. A close review of the Proposal, however, suggests that it is firmly grounded within the traditional SEC disclosure framework that has been in place for close to nine decades. The Proposal is certainly ambitious (and overdue), but it is by no means extraordinary. This, in turn, suggests that challenges to the Proposal’s legitimacy ought to fail, even if certain aspects of the Proposal could stand to be improved as part of the ongoing rulemaking process.
This Essay makes the case that the SEC’s Climate Disclosure Proposal is in keeping with longstanding regulatory practice by highlighting several features of the traditional disclosure regime and the new Proposal. I focus my analysis on arguments I’ve developed in prior research, arguments discussed in forthcoming work, and the particular aspects of the new Proposal. This Essay is not intended to be comprehensive, and it should be noted that the broader issue of ESG disclosure has generated extensive debate and much insightful analysis.
Keywords: ESG, climate-related financial disclosure, materiality, double materiality, dynamic materiality, universal materiality, American materiality, TSC Industries v. Northway, TCFD, Regulation S-X, Regulation S-K, SEC disclosure regime
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