SEC commissioner cautions against agency’s abandonment of defense for climate rules, citing legality

SEC Commissioner Caroline Crenshaw has cautioned that the decision by the Securities and Exchange Commission (SEC) to remove its defence of climate disclosure regulations is not in accordance with the law. Last week, SEC Acting Chair Mark Uyeda and Commissioner Hester Peirce voted to cease the agency’s legal defence of rules mandating companies to disclose climate-related risks and greenhouse gas emissions. However, Crenshaw argues that the current commission’s dismantling of the regulation violates the Administrative Procedure Act (APA), which governs the SEC’s rule-making procedures. Apart from disobeying the APA, she indicated that the commission’s withdrawal contradicts previous practices and indicates poor governance.

Crenshaw emphasized that the SEC cannot abandon regulatory actions simply because the existing commission does not support a rule that was approved in the past. She highlighted, “The APA prescribes a careful, considered framework that applies to both the creation of new rules and the repeal of existing ones. There are no shortcuts. However, that is precisely what the Commission is doing now.” Consequently, she urged the SEC to fulfill its responsibilities and defend the existing regulation in court cases. If the agency opts not to defend the rule, she suggested requesting the court to pause the litigation until a rule they are willing to uphold is devised, or, at least, appointing counsel to undertake this task.

Crenshaw’s statements reflect her concerns over the SEC’s methods, stating, “Today’s actions are but one symptom of a much larger problem – the Commission taking shortcuts in order to achieve preferred outcomes.” She added, “We are now firmly in a period of policy-making through avoidance and acquiescence, rather than policy-making through open, transparent, and public processes.” According to her, bypassing the APA does not serve the markets, capital formation, or investors and merely shifts the responsibility to others.

Minerva, a renowned provider of sustainable stewardship solutions, offers a blog focused on updates in ESG investing and stewardship. With over 25 years of experience, Minerva equips investors with essential resources such as ESG research and data to navigate the complex landscape of stewardship and proxy voting, ensuring that their decisions align with sustainable principles.

For individuals interested in reading further articles or exploring additional content on ESG, they can access more of Minerva’s articles. Ultimately, Minerva seeks to advance responsible investing practices and foster sustainable financial decisions through their expertise and commitment to stewardship-focused solutions.