As sure as there is going to be a hurricane season, mandatory climate-change disclosures of public companies, and perhaps private ones as well, are on their way. In March, the Securities and Exchange Commission (SEC) requested public input on what these new disclosures should be. In May, SEC Commissioner Allison Lee presented in a speech a legal analysis of the SEC’s authority to require such disclosures, even if the disclosures are not material to a reasonable investor. She based this analysis on wording found in the federal securities law that repeatedly states that the SEC has authority to require disclosures that are “in the public interest or for the protection of investors.” Such language implies broad powers in requiring disclosures. If Commissioner Lee is correct—and I believe that she is—the issue becomes: What, if any, limitations should the SEC impose on itself in terms of requiring climate-change disclosures?
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