Congressional Testimony: Problems with the SEC's Climate Disclosure Proposal

20 Pages Posted: 21 Feb 2024 Last revised: 24 Feb 2024

See all articles by Lawrence A. Cunningham

Lawrence A. Cunningham

George Washington University; Quality Shareholders Group; Mayer Brown

Date Written: January 18, 2024


This Congressional testimony, requested by the House Financial Services Committee, identifies the fatal flaws embedded in the SEC's controversial climate disclosure rule proposal. To summarize some primary problems, the proposal:

disregards evidence that most individual investors buy stocks primarily to save, not to influence climate policy;

does not address the millions of individual American investors who need the SEC’s protection as they save for education, homes, retirement, and philanthropy; and

ignores conflicts of interest between large asset managers and their beneficiaries—ordinary Americans—who have different preferences and goals.

In addition, the proposal mandates irrelevant and burdensome disclosures that would harm investors by:

forcing companies to disclose information about the greenhouse gas emissions of their suppliers, employees, and customers, which is useless to investors;

making companies report climate impact, not just climate risk, which investors do not need;

imposing millions of dollars in annual costs on companies with no clear benefit for investors (or the climate);

compelling the disclosure of information that is inherently speculative and uncertain, as likely to mislead investors as to inform them;

spurring lawsuits over disclosure adequacy, which wastes resources even when baseless;

discouraging companies from being publicly traded, which deprives ordinary investors of opportunities and frustrates capital formation; and

usurping state corporate law and company business judgment, which undermines investor rights and interests.

Furthermore, the Proposal faces legal challenges under:

the major questions doctrine, as it lacks clear Congressional authorization for its significant policy reach, as suggested in cases since the Proposal was issued, especially West Virginia v. EPA;

the First Amendment, for compelling company speech on controversial matters; and

the Administrative Procedure Act, as it solves no problem within the SEC’s mandate, and includes no proper cost-benefit analysis, perils that led another SEC rule to be vacated last month.

Keywords: SEC authority, ESG, institutional investors, individual investors, major questions doctrine, West Virginia v. EPA, First Amendment and climate disclosure, information economics, government policy, financial markets, government power, federalism, state corporation law, agency costs

JEL Classification: G18, G38, H11, K20

Suggested Citation

Cunningham, Lawrence A., Congressional Testimony: Problems with the SEC's Climate Disclosure Proposal (January 18, 2024). GWU Legal Studies Research Paper No. 2024-12, GWU Law School Public Law Research Paper No. 2024-12, Available at SSRN:

Lawrence A. Cunningham (Contact Author)

George Washington University ( email )

Quality Shareholders Group ( email )

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Mayer Brown ( email )


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