Michael Littenberg is partner, Marc Rotter is counsel, and Hannah Shapiro is a law clerk at Ropes & Gray LLP. This post is based on their Ropes & Gray memorandum. Related research from the Program on Corporate Governance includes The Illusory Promise of Stakeholder Governance (discussed on the Forum here) and For Whom Corporate Leaders Bargain by Lucian A. Bebchuk, Kobi Kastiel, and Roberto Tallarita (discussed on the Forum here); and Restoration: The Role Stakeholder Governance Must Play in Recreating a Fair and Sustainable American Economy—A Reply to Professor Rock by Leo E. Strine, Jr. (discussed on the Forum here); Stakeholder Capitalism in the Time of COVID by Lucian Bebchuk, Kobi Kastiel and Roberto Tallarita (discussed on the Forum here); Corporate Purpose and Corporate Competition by Mark Roe (discussed on the Forum here).
Last month, the Securities and Exchange Commission proposed long-awaited rules that would mandate enhanced climate-related disclosures by public companies. In this post, we provide an overview of this significant, and controversial, rulemaking proposal. We also provide our views on where the rules fit into governance, compliance and disclosure more broadly.
A Bit of Background and the Broader Context
Enhanced environmental disclosure has been a topic of discussion within the SEC since the 1970s. More recently, with the January 2021 change-over in administration and the resulting shift in rulemaking philosophy, climate disclosure has been an area of increasing SEC focus. Among other actions, during February 2021, shortly after taking office, then-Acting Chair Allison Herren Lee issued a statement directing the SEC’s Division of Corporation Finance to enhance its focus on climate-related disclosure in public company filings.
In March 2021, the SEC launched a public consultation requesting input from investors, registrants and other market participants about whether current disclosures adequately inform investors about climate change. Approximately 600 unique comment letters were submitted to the SEC by leading issuers, institutional investors, trade associations, NGOs and others (Ropes & Gray advised several clients on their comment letters). Many of the more significant letters are cited in the SEC’s Proposing Release for the new climate disclosure rules.