George Mason Law Professor Donald Kochan recently published a Wall Street Journal op-ed that highlighted various reasons as to why the Securities and Exchange Commission (SEC) should actively avoid any sort of climate regulation. His piece called out the SEC for overstepping its congressional mandate into an area which is very clearly beyond its proper scope of authority..
Professor Kochan notes that Congress delegates authority to certain executive agencies for specific reasons. Climate regulation was not delegated to the SEC because there are other agencies who are already tasked with it. Those agencies are far better equipped in that area. The SEC, on the other hand, is meant to act as a financial regulator that protects against fraud and protects investors. Its resources are not adequate for other objectives.
In addition, the regulations the SEC wants to impose on American companies would be highly and unnecessarily burdensome. The regulations include requiring businesses to produce annual reports on “climate-related risks.” Further, they will have to hand over financial statements if the climate-related risks are “reasonably likely to have a material impact” on their business. Not only is this costly, but it is very vague and likely to cause uncertainty in America’s business community.
Professor Kochan’s expectation is that this proposal will be overturned in court much like the Environmental Protection Agency’s (EPA) Clean Power Plan was in West Virginia v. EPA. In this case, the Supreme Court ruled that agencies cannot assign themselves new powers without congressional directive. The case can now serve as an example – and warning – for the SEC. Executive agencies have a narrow scope of authority to ensure the law of the land is enforced. They are not broad policymakers. This applies to the SEC now as surely as it did for the EPA back then.