The seal of the U.S. Securities and Exchange Commission SEC is seen at their headquarters in Washington, D.C.
A U.S. Supreme Court decision to curtail the Environmental Protection Agency's power to regulate greenhouse gas emissions may be bad news for the Securities and Exchange Commission SEC's bid to require companies to disclose emissions.
Legal experts said the ruling raises questions about the authority of other federal agencies and suggests that the court may block other efforts to ink major rules, as it relates to the EPA's authority to regulate power plant emissions.
It could be a big setback for the SEC, which is drafting a new rule requiring public companies to disclose their direct and indirect greenhouse gas emissions. The SEC says investors need to know the data to make informed decisions, while corporate groups say the rule is overly onerous and costly.
The Supreme Court's decision was based on the major questions legal doctrine that requires explicit congressional authorization for action on issues of broad importance and societal impact.
Dennis Kelleher, chief executive of Wall Street watchdog Better Markets, said the decision is essentially applicable across all regulatory agencies and we expect the SEC and other financial federal regulators to quickly become bullseyes for corporate America. He said that the SEC's climate rule was an obvious early target for legal challenges.
In comments to the SEC, powerful corporate groups including the U.S. Chamber of Commerce had argued that the proposal, unveiled in March, was unprecedented in scope and complexity and exceeded the authority of the SEC.
The Chamber did not immediately make a statement.
Some of the most pointed criticism of the rule comes from Republican politicians who say that efforts to address environmental issues are best left to elected leaders, not businesses.
On Thursday, Senator Patrick Toomey, a top Republican on the Senate Banking Committee, singled out the SEC rule when asked by Bloomberg TV about the implications of the Supreme Court ruling for other agencies.
The SEC is trying to impose a whole climate change disclosure regime with no authority from Congress to do that, he said.
A SEC spokeswoman didn't respond immediately to a request for comment.
The agency has received much support for the rule, including from Democratic U.S. Senators and representatives from the California Public Employees' Retirement System, the largest U.S. pension fund.
Some supporters of the rule argued on Thursday that the Supreme Court ruling shouldn't stop the SEC from proceeding because it was well within the SEC's remit, authorized by Congress, to regulate corporate disclosures, and did not meet the bar as having broad importance and societal impact.
Some former SEC lawyers said Thursday's ruling would embolden opponents of the rule, some of whom had already signaled they may pursue the issue in the courts.
Howard Fischer, a partner at Moses Singer, said that the SEC might have had a difficult time escaping judicial skepticism about the scope of agency authority to act in the climate area.
The SEC's argument that climate risk is a finance risk is not likely to get a sympathetic earlobe from the Supreme Court.