Lisa M. Fairfax is a Presidential Professor at the University of Pennsylvania Carey School of Law. This post is based on her recent article forthcoming in the Texas Law Review. Related research from the Program on Corporate Governance includes The Illusory Promise of Stakeholder Governance (discussed on the Forum here) and Will Corporations Deliver Value to All Stakeholders? (discussed on the Forum here) both by Lucian A. Bebchuk and Roberto Tallarita.
In March 2022, for the first time in its history, the Securities and Exchange Commission (the “SEC”) proposed rules mandating disclosure related to climate change. The proposed rules are remarkable, first and foremost, because many in the business community continue to vehemently insist that environmental and climate change information is not material. Indeed, as one SEC Commissioner noted, corporations that responded to the SEC’s most recent requests for enhanced climate-related disclosure “generally have stated that the requested disclosures by SEC staff were largely immaterial and inappropriate for inclusion in SEC filings.” The proposed rules are also remarkable because previously the SEC has resisted climate-related disclosure, based primarily on the argument that such information strayed beyond strictly financial concerns and thus should not be the subject of mandated disclosure. This resistance is exemplified by the current lack of any significant SEC disclosure mandates for climate change. And of course, the proposed rules have sparked considerable controversy and pushback including allegations that the rules violate the First Amendment, would be too costly, and focus on “social” or “political” issues beyond the SEC’s mission. Thus, it is unclear whether, or to what extent, a climate-related mandate will emerge. Nonetheless, the proposed rules represent a significant and historical occurrence in the lifecycle of the SEC’s disclosure regime.
