The SEC’s ESG Reporting Rule: Understanding the Debate over Climate-Risk Disclosure Requirements

In March 2022, the Securities and Exchange Commission proposed a new rule that would establish climate-risk disclosure requirements for public companies. The 490-page proposal includes requirements for disclosing direct greenhouse gas emissions (scope 1) and indirect emissions related to use of electricity or other forms of energy (scope 2). While supporters hailed the proposed rule’s effort to standardize the disclosures many ESG-focused funds have been making, others zeroed in on a requirement that would obligate larger companies to disclose GHG emissions from upstream suppliers and downstream customers (scope 3).

After receiving thousands of comments favoring and opposing the proposal, the SEC postponed its target date for finalizing the rule to spring 2023. Much of the debate centers on the scope of the SEC’s authority to mandate climate risk disclosure, an issue that took on additional dimensions after the Supreme Court’s June 2022 decision in West Virginia v. EPA, which struck down an EPA rule regulating GHG emissions under the Clean Air Act as contrary to the “major questions doctrine.” Many predict that the final ESG rule will be litigated regardless of what changes the SEC may make to address issues that commenters raised.

With the SEC ESG final rule expected soon, this program brings together distinguished speakers who outline the arguments for and against the SEC’s effort to regulate in this area.

• Paul Ray leads The Heritage Foundation’s work on regulatory and economic policy as Director of the Thomas A. Roe Institute for Economic Policy Studies, building on his previous experience as Senate-confirmed Administrator of the Office of Information and Regulatory Affairs at the Office of Management and Budget. He has written widely on a number of regulatory issues, including the SEC’s authority to set corporate climate policy.
• George Georgiev is an Associate Professor of Law at Emory University Law School, focusing on Business Law, Corporate Governance, Securities Regulation, Mergers & Acquisitions, Corporate Finance, and Executive Compensation. Professor Georgiev co-authored an analysis affirming the SEC’s authority to adopt climate-related disclosure rules, and filed comments in the rulemaking.

The panel was moderated by Jane Luxton, Managing Partner of the Washington, DC office of Lewis Brisbois Bisgaard & Smith, and co-chair of the firm’s Administrative Law & Regulatory Practice.