NEW YORK, NY – On March 21, the Securities and Exchange Commission (SEC) proposed a new rule for companies that have stock traded on public exchanges. The proposed new rule, which comes to 490 pages, revolves around climate change; it would require a host of new disclosures for companies’ own greenhouse gas emissions, as well as the emissions of suppliers and contractors whose securities are not listed on public stock markets. Most of these required disclosures, including the company’s “direct” and “indirect” emissions, would not need to be “material” to investors’ buy and sell decisions. Required disclosures of third-party contractors and suppliers not involved in electricity generation would need to be material, though the proposed rule’s materiality definition is far laxer than the SEC’s traditional understanding.
Manhattan Institute senior fellow and director of legal policy James Copland submitted two statements to the SEC last week as part of the agency’s “notice and comment” rulemaking process.
His comments suggest the following:
- In a written comment, which he submitted under his own name, co-authored with RealClearFoundation’s Bernard Sharfman, Copland contends that the SEC’s proposed rule was “arbitrary and capricious.” Copland and Sharfman argue that in failing to limit its proposed disclosure regime to investors’ material interests, unlike in earlier climate-related disclosure guidance issued by the Commission, the SEC’s proposed rule would exceed its statutory authority. Copland and Sharfman also argue that the proposed rule’s inquiry into board and management decision-making processes involving climate-related matters would interfere with state law on corporate governance without Congressional authorization. Finally, Copland and Sharfman argue that the proposed rule is constitutionally suspect, both in resolving a “major question” of policy properly reserved to Congress; and in compelling “controversial” speech, in violation of the First Amendment.
- Separately, Copland also entered into the record a 68-point declaration, included as an appendix to a comment letter submitted by former White House Counsel C. Boyden Gray. In the declaration, Copland argues that the SEC’s proposed rule “is not about protecting the market from climate-related risk, but about directing ‘capital to favored businesses and to advance favored political and social goals’”; that the proposed rule “masks conflicts of interest”; that the proposed rule’s disclosure regime would “neither decrease market risk from [greenhouse gas] emissions nor decrease [such] emissions themselves”; and that the proposed rule’s conception of climate-related “transition risks” is “too narrow and too speculative.”
Click here to visit the full body of Copland's work with the Manhattan Institute, as well as previous government testimony related to ESG investing and shareholder interests.