The Securities and Exchange Commission (SEC) climate disclosure rule posts real problems for public companies. The SEC’s mission is to do facilitate capital formation and maintain market efficiency, but for the first time in its 90-year history, the SEC has injected political risk factors into its traditionally principles-based disclosure framework.

Leading up to the new rule, the SEC buckled under pressure from left-wing special interests to impose the first environmental disclosure mandate on public companies. If the SEC’s final rule is allowed to go into effect by the courts, it will be a financial disaster for the public markets. //

The climate rule will require most large and mid-sized public firms to report annual and quarterly disclosures that account for an endless range of climate risk factors. This translates to approximately 3,488 firms spending upwards of $628 million on direct disclosure costs and millions on indirect costs.

Consequentially, firms will need to expend great resources hiring climate scientists, ESG experts, lawyers, and accountants to properly prepare their disclosures for SEC review, neglecting the time normally spent on enhancing their market value.

Corporate boards will lose much of their discretionary decision making, forced to prioritize environmental risk factors over purely financial concerns. In its place, corporate boards must infuse speculative climate science to determine which climate risks warrant inclusion in their SEC disclosure.

With the SEC’s 12 new climate disclosure categories, investors will be spammed with a flood of confusing and potentially contradictory environmental data. This will undermine the ability of investors to navigate the actual meaningful risks in the markets or assess the health of a company. The doom and gloom of climate risks will imperil sensible financial analysis. //
As many as 25 state attorneys general have pursued two lawsuits against the SEC for exceeding its statutory authority and violating the major questions doctrine by promulgating climate regulation.

The Eighth Circuit Court of Appeals was chosen by the Judicial Panel on Multidistrict Litigation to consolidate nine challenges into one case against the SEC. Soon after, the SEC halted the rule’s implantation to fend off its legal challenges.

The SEC is in the unenviable position of trying to defend the indefensible. //

Mandatory climate disclosures represent an undemocratic form of ESG policymaking that neither Congress nor the U.S. electorate actually approved.