Law and finance professors from across the country have criticized the Securities and Exchange Commission’s (SEC’s) March 21 proposal to compel climate-related disclosures by public companies, arguing that the move exceeds the SEC’s authority and reflects the outsized influence of “institutional asset managers who are managing other people’s money, not their own.”
“Rather than provide investor protection,’ the Proposal seems to be heavily influenced by a small but powerful cohort of environmental activists and institutional investors, mostly index funds and asset managers, promoting climate consciousness as part of their business models,” the academics wrote in an April 25 letter to the SEC.
“I joined the letter because I believe the SEC is overstepping its authority,” said Jonathan Berk, a professor of finance at Stanford University, in an email interview with The Epoch Times.
“I don’t like the precedent that appears to be set, that now the SEC becomes the arbiter of what risks investors should care about,” he added.
“I have heard confidentially from many law firms, current and former government officials, and professional associations who have said that the issues we identified and explained will be helpful to them as they parse the proposal and formulate their own comment letters on the proposal, or potential lawsuits if the SEC proceeds with the rule,” said Lawrence Cunningham, the lead author of the letter and a law professor at George Washington University, in an email to The Epoch Times.
“I have heard from a dozen scholars in our field agreeing with the thrust of the letter and offering to add their names,” he added.
Authored by 22 academics from major institutions such as Harvard University, Yale University, George Mason University, Northwestern University, and Stanford University, the letter argues that investors lack any meaningful consensus on climate change, raising doubts about claims of uniform “investor demand” for sweeping SEC regulations.
“People’s opinions differ sharply, and investors have varied views on issues associated with the earth’s climate,” the authors note.
“Climate models are imprecise and were not designed for the purpose of measuring risk exposure. Using them to measure exposure would be irresponsible,” Stanford’s Berk told The Epoch Times.
The letter also takes issue with the proposal’s emphasis on global financial consortia organized by the United Nations, including the Glasgow Financial Alliance for Net Zero and the Net Zero Asset Managers Initiative.
“The United Nations is neither a business nor an investor and lacks any relevant expertise in either domain. It is a political institution coordinating international policies on contentious topics, including as an incubator of the concept of ‘ESG’ and climate management that provide the backdrop for the Proposal,” the letter states, referring to the abbreviation for ‘environmental, social, and governance.’
“The Proposal relies heavily on global institutions and institutional investors incorporated outside the U.S. It is not obvious that such institutions share any concern for American competitiveness,” it later notes.
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