Comment Letter on SEC Climate Disclosure Proposal by 22 Law and Finance Professors

Abstract

This comment letter, by a group of 22 professors of law and finance, expresses concern that the SEC’s recent proposal to impose extensive mandatory climate-related disclosure rules on public companies (the “Proposal”) exceeds the SEC’s authority. In addition, rather than provide “investor protection,” the Proposal seems to be heavily influenced by a small but powerful cohort of institutional investors, mostly index funds and asset managers, promoting climate consciousness as part of their business models. The analysis raises concerns that the Proposal is neither necessary nor appropriate for either investor protection or the public interest and will not promote other statutory goals. The SEC would do better to withdraw the Proposal and revisit its approach to this subject.
I. “Investor Demand” versus “Investor Protection”
A. Investor Varieties: Diverse Institutions and Individuals
B. Climate Shareholder Proposals: Few Are Made, Most Lose, Many Are Political
C. The Ample Supply of Climate Disclosure
D. Correlation of Climate Practices with Economic Performance Is Not Causation
II. Authority of Others and the “Public Interest”
A. The Environmental Protection Agency’s Statutory Jurisdiction
B. State Corporate Law Prerogatives on Purposes, Powers and Business Judgments
C. Risk of Unconstitutional Compelled Political Speech
III. Other Statutory Considerations
A. Certain High Costs versus Highly Speculative Benefits
B. Unduly Benefiting ESG Investors Impairs Investment Industry Competition
C. Compliance Burdens Discourage Public Company Registrations
Conclusion
Appendix: Analysis of the Proposal’s Citation Patterns
Signatories:
Stephen M. Bainbridge (UCLA)
Jonathan B. Berk (Stanford)
Sanjai Bhagat (Colorado)
Bernard S. Black (Northwestern)
William J. Carney (Emory)
Lawrence A. Cunningham (GW)
David J. Denis (Pittsburgh)
Diane Denis (Pittsburgh)
Charles M. Elson (Delaware)
Jesse M. Fried (Harvard)
Sean J. Griffith (Fordham)
Jonathan M. Karpoff (Washington)
Edmund W. Kitch (Virginia)
Katherine Litvak (Northwestern)
Julia D. Mahoney (Virginia)
Paul G. Mahoney (Virginia)
Adam C. Pritchard (Michigan)
Dale A. Oesterle (Ohio State)
Roberta Romano (Yale)
Todd J. Zywicki (George Mason)

Keywords: SEC authority, climate disclosure, ESG, institutional investors, individual investors, information economics, government policy, financial markets, government power, federalism

JEL Classification: G18, G38, H11, K20