Washington, DC — On June 17, 2022, leading First Amendment and securities disclosure law experts submitted a comment in support of the Securities and Exchange Commission’s (SEC) Proposed Rule, The Enhancement and Standardization of Climate-Related Disclosures for Investors.

The letter was spearheaded by Rebecca Tushnet, Frank Stanton Professor of First Amendment, Harvard Law School. She was joined by Caroline Mala Corbin, Professor of Law & Dean’s Distinguished Scholar, University of Miami School of Law; Ellen P. Goodman, Distinguished Professor, Rutgers Law School; Sarah C. Haan, Professor of Law, Washington & Lee University School of Law; Sarah E. Light, Associate Professor of Legal Studies & Business Ethics, University of Pennsylvania; and David C. Vladeck, A.B. Chettle, Jr. Professor of Law, Georgetown Law School.

The SEC proposed a rule that would require public companies to disclose certain climate-related risks in their registration statements and annual reports. Despite vocal opposition from some industry and conservative groups, including arguments from Republican attorneys general claiming that the SEC’s disclosure rule would violate the First Amendment, strong evidence supports the investor need for this kind of information.

This scholars’ comment, submitted by Democracy Forward, makes it clear that not only is the Proposed Rule consistent with long-established First Amendment principles, the Proposed Rule is necessary to protect investors. The experts explain that the disclosure requirements outlined in the SEC’s Proposed Rule align with existing First Amendment jurisprudence and follow decades of precedent with respect to the disclosure of material environmental issues. The comment also notes that a company seeking public investments cannot rely on the First Amendment to conceal relevant information from prospective investors and owners.

“The very purpose of the SEC is to issue regulations in the public interest that protect investors and facilitate the efficient allocation of capital. It has a nearly hundred-year history of mandating disclosures relevant to investors,” said Samara Spence, Senior Counsel at Democracy Forward. “The proposed disclosures are consistent with this purpose and long history.”

“The First Amendment is not a bar to ordinary economic regulation; to say that public companies have a free speech right to withhold environmental risk information from shareholders is a misuse of rights language,” said Ellen P. Goodman, Distinguished Professor at Rutgers Law School.

“The SEC has long required publicly-traded firms to disclose environmental risks to investors,” said Sarah E. Light, Associate Professor of Legal Studies and Business Ethics at the Wharton School of the University of Pennsylvania. “The proposed rule makes clear that environmental disclosures must include climate-related risks. And if a company has publicly set an emissions-reduction target, it must provide investors with information about how it intends to reach that target. More uniform disclosure rules will allow investors–both individuals and institutions–to understand how climate risks affect individual firms and to make comparisons across firms and industries.” 

“The proposed climate risk disclosure rule does not violate corporations’ First Amendment rights,” said Sarah C. Haan, Professor of Law, Washington and Lee University School of Law. “It does not require companies to take a position on climate change or to endorse an ideological position. If investors can’t get climate risk information from companies, the ‘invisible hand of the market’ won’t be able to price climate risk into stock, which should really worry Americans who invest in the stock market to save for retirement. They are the ones who will feel the pain of a major market correction if the stock market ignores climate risk.”

Growing evidence shows that companies may face climate-related risks like catastrophic weather events, supply chain disruptions, changing demand, and regulatory and transition costs as the world uses fewer fossil fuels. Investors managing hundreds of trillions of dollars have been pressing for consistent information about climate risks and how companies have prepared for them. The consequences of not having access to this information are high: many experts believe that climate risks are not currently being accurately and consistently incorporated into asset prices. The letter notes that many publicly-traded companies – including Adobe, Alphabet, Chevron, General Motors, and Lockheed Martin – already have a practice of making similar disclosures or extensively discussing anticipated climate-related risks in their annual reports. And many public companies and their representatives have admitted that climate transitions could affect their bottom line.

Read the comment here.


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