So, unsurprisingly, the attorney general’s rhetoric about the proposed rule has been remarkably hyperbolic, suggesting that a rule that simply requires companies to disclose information to the SEC, as they regularly do, is nothing short of war. totally against American identity. “The awakening left is going full throttle on its mission to change every facet of American life,” said West Virginia Attorney General Patrick Morrisey, “and erode our democratic institutions to fit their liberal agenda. The Biden administration wants to radically transform the SEC and other agencies run by unelected bureaucrats and turn them into champions of climate change.”
The comment sets the stage for a legal battle that could thwart the SEC’s and potentially other agencies’ ability to take physical reality into account as temperatures rise. “The door can be closed before anyone realizes what’s going on,” says Sarah Haan, a law professor at Washington & Lee University. In addition to the leading questions doctrine, the new rule is also likely to be challenged on First Amendment grounds. Republican attorneys general also raised the possibility in their comment. If so, Haan says, it could open a “Pandora’s box” of constitutional challenges to securities regulation in general.
There are several ways to insulate climate-related financial regulations from legal challenges. “The SEC should be really clear about the purpose of the rule,” Haan argues, and under his mandate articulate issuance disclosures to protect the interests of both investors and the public. “The weather risk rule is a continuation of longstanding securities regulation,” she adds. “It’s not radical or new, it’s just a continuation of the types of security regulation that we’ve always had,” including corporate disclosures that cover the many other types of risks investors could face. madison condomprofessor at Boston University School of Law,It adds that the use of Dodd-Frank systemic risk protections, in some ways a more natural choice to assess the impact of climate change on the financial system, could provide additional protections for possible new rules in the Treasury and the Federal Reserve.