The Reuters 2022-03-22 piece U.S. SEC proposes companies disclose range of climate risks, emissions data begins:

WASHINGTON, March 21 (Reuters) - The U.S. securities regulator on Monday proposed requiring U.S.-listed companies to disclose a range of climate-related risks and greenhouse gas emissions, part of President Joe Biden's push to join global efforts to avert climate-related catastrophes.

The U.S. Securities and Exchange Commission (SEC) unveiled its long-anticipated draft rule under which companies would disclose their own direct and indirect greenhouse gas emissions, known as Scope 1 and Scope 2 emissions. It would also require companies to disclose emissions generated by their suppliers and partners, known as Scope 3 emissions, if they are material.

SEC chair Gary Gensler said the agency was responding to investor demand for consistent information on how climate change will affect financial performance of companies they invest in. But prominent Republicans accused the regulator of overstepping its legal authority, and the U.S. Chamber of Commerce vowed to fight parts of the rule.

The draft proposal, subject to public feedback and likely to be finalized later this year, should help investors get the information they are seeking while also increasing the reporting burden for Corporate America.

It would also require companies to disclose the "actual or likely material impacts" that climate-related risks will have on their business, strategy and outlook, including physical risks as well as possible new regulations such as a carbon tax.

Companies that have set emissions goals or announced other plans to transition away from fossil fuels would have to provide details on how and when they expect to do so. read more

Further down it mentions a substantial amount of "push-back" from politicians and lobbyists, including this reference to a US Supreme Court ruling:

The SEC said the Scope 3 requirement would include carve-outs based on a company's size, and that all the emissions disclosures would be phased in between 2023 and 2026.

It was not immediately clear how many companies would have to make Scope 3 disclosures, given they would have largely have the discretion to decide what counts as 'material.'

The Chamber of Commerce, the country's biggest business lobby, called the proposal too prescriptive and complained it would force companies to disclose information that was largely immaterial at the expense of more meaningful data.

“The Supreme Court has been clear that any required disclosures under securities laws must meet the test of materiality, and we will advocate against provisions of this proposal that deviate from that standard," Tom Quaadman, an executive vice president with the group, said in a statement.

Question: What US Supreme Court ruling(s) address the SEC's proposed "Scope 3 disclosure rule" that companies must state their climate change impact?

Potentially helpful:

2 Answers 2


He's probably referring to Basic Inc. v Levinson which is the main case about "materiality"

The fraud-on-the-market theory is the idea that stock prices are a function of all material information about the company and its business. It applies in open and developed securities markets, where it can be assumed that all material information is available to investors. The theory states that under these conditions, there is a causal link between any misstatement and any stock purchaser, because the misstatements defraud the entire market and thus affect the price of the stock. Therefore, a material misstatement's effect on an individual purchaser is no less significant than the effect on the entire market. The question before the court was whether this entitles an individual stock purchaser a presumption of reliance, even if the purchaser did not directly rely on the misstatements.

The theory the SEC seems to be advancing here is that activity that might affect the climate is a potential driver of stock price.

  • It seems that there are at least three slightly different theories which the SEC is advancing with respect to climate change and potential impact on stock prices. A) how the company's and/or the company's suppliers activities might be impacted by new or possible new regulations related to climate change (& impact on stock price); B) how the company and/or the company's suppliers may be materially impacted by climate change (& its impact on stock price), and C) as you've mentioned, that how the company's and/or the company's supplier's activities affect climate change might impact stock price.
    – Makyen
    Mar 22, 2022 at 15:02
  • It's possible that (C; effect of activities) is included only such that (A; new regulations) and (B; actual material impact of climate change) and their potential impact on stock price can be independently evaluated.
    – Makyen
    Mar 22, 2022 at 15:02

What US Supreme Court ruling(s) address the SEC's proposed "Scope 3 disclosure rule" that companies must state their climate change impact?

None. The rule was only proposed today, so there hasn't been time for any related litigation, much less for that litigation to reach the Supreme Court. Furthermore, US federal courts do not entertain litigation concerning proposed rules because of the case or controversy clause of the US constitution.

The bold material in the question is not speaking of disclosures under the "scope 3 disclosure rule" but rather about disclosures under "securities laws" generally. The assertion is that the court has established a general principle that the SEC cannot require companies to disclose information that isn't material to investor's decisions. It further asserts (by implication, at least) that there are elements of the proposed rule that fall afoul of this general principle. I do not know whether either of those assertions is accurate.

  • 1
    I think the question is what authority Tom Quaadman, of the Chamber of Commerce, is referring to, not whether there is a ruling on this particular rule, although the question does show some confusion on that point and may as you make clear be misunderstanding what Quaddman is really referring to.
    – ohwilleke
    Mar 21, 2022 at 22:46
  • 1
    @ohwilleke you are right, perhaps "addresses" is suboptimal. Perhaps "applies to"? I'm interested in existing rulings and their relationship to the proposed rules the SEC published just recently.
    – uhoh
    Mar 21, 2022 at 23:57

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