|
Listen to this story:
|
As the dust settles on last week’s final SEC Climate Disclosure Rule, commentary around the content of the final rule is getting increasingly pointed, and battle lines are being drawn. The implications can be split up into three main categories:
The Good
While some were disappointed that the final rule was “watered down,” 91% of investors believe the SEC’s final rule will help them make more informed investment decisions — Scoring better than California’s climate laws and even than the EU’s Corporate Sustainability Reporting Directive (CSRD).
This piece in the FT pointed out that the SEC rule simply adds to the growing number of policies requiring climate disclosure. During the two years of waiting for the SEC to finalize their rule, the rest of the world moved ahead with similar and more stringent requirements. Mark Campanale, founder of the Carbon Tracker, said, “American corporations that want to operate in Europe are going to have to abide by regulations around disclosure and reporting that they have been fiercely lobbying against in the US.”
The Bad
On the flip side, many experts think the SEC missed an opportunity by not working with other regulators and standards setters to make their rules “interoperable.” Former SEC Commissioner and one of the climate rule’s architects, Allison Herren Lee, said, “[The SEC] just ignored the need to harmonize globally, and . . . that’s a nightmare for issuers.”
Despite the rule being weakened to reduce the cost burdens of the original proposal (estimated to cost $530,000 on average in the first year of disclosure). The new estimates of the cost of disclosure are still pretty high, ranging from less than $197,000 to over $739,000 per year over the next ten years, with an average 1st year estimated cost of $327,000, which some believe will be an issue for reporters and could deter companies from issuing an IPO.
RELATED ARTICLE: Tim Mohin: Top Five Takeaways from SEC Final Climate Rule
The Ugly
Whether the rule becomes a reality is still up in the air. While it seems certain to be delayed by litigation, which one source claimed could take up to an additional four years, the likelihood is that the Supreme Court will make the final decision on whether the rule is implemented (if it gets that far).
Last week, we shared the 10 Republican states that have already filed a suit to block implementation of the rule. Another legal challenge from an energy company has been filed and the Chamber of Commerce is threatening litigation against the final rule. On the other side, climate action groups are suing because the bill does not go far enough.
Opponents are likely to use First Amendment free speech arguments – alleging that the rule “compels speech” by requiring climate disclosure. Other opponents will cite the “major questions” doctrine, a legal theory adopted by the Supreme Court in West Virginia v. EPA, a landmark 2022 ruling that curbed EPA’s ability to regulate emissions from coal-fired power plants. Some lawyers claim the 24,000 comment letters received by the SEC will increase the legal challenges since most arguments have already been made.
This Smart Read article is contributed by Tim Mohin, Global Sustainability Leader, BCG. Every week ESG News delivers smart commentary from ESG practitioners and experts to unpack issues of the week. Submit your ESG Smart Read to editor@esgnews.com