Abstract
This Article uses the Securities and Exchange Commission’s SEC’s recent foray into Environmental, Social, and Governance ESG to illuminate ambiguities in First Amendment doctrine. Situating mandatory disclosure regulations within the compelled commercial speech paradigm, it identifies the doctrinal hinge as “controversy.” Rules compelling commercial speech receive deferential judicial review, provided they are purely factual and uncontroversial. The Article argues that this requirement operates as a pretext check, preventing regulators from exceeding the plausible limits of the consumer protection rationale.
Applied to securities regulation, the compelled commercial speech paradigm requires the SEC to justify disclosure mandates as a form of investor protection. The Article argues that investor protection must be conceived on a class basis—the interests of investors qua investors, rather than focusing on the idiosyncratic preferences of individuals or groups of investors. Disclosure mandates that are uncontroversially motivated to protect investors are eligible for deferential judicial review. Disclosure mandates failing this test must survive a form of heightened scrutiny.
The SEC’s recently proposed climate disclosure rules fail to satisfy these requirements. Instead, the proposed climate rules create controversy by imposing a political viewpoint, by advancing an interest group agenda at the expense of investors generally, and by redefining concepts at the core of securities regulation. Having created controversy, the proposed rules are ineligible for deferential judicial review. Instead, a form of heightened scrutiny applies, under which they will likely be invalidated. Much of the ESG agenda would suffer the same fate. However, the vast majority of the SEC’s disclosure mandates, which aim at eliciting only financially relevant information, would survive.
Recommended Citation
Sean J. Griffith,What’s “Controversial” About ESG? A Theory of Compelled Commercial Speech under the First Amendment, 101 Neb. L. Rev. 876(2023)
Available at: https://ir.lawnet.fordham.edu/faculty_scholarship/1306
FAQs
The SEC's recently proposed climate disclosure rules fail to satisfy these requirements. Instead, the proposed climate rules create controversy by imposing a political viewpoint, by advancing an interest group agenda at the expense of investors generally, and by redefining concepts at the core of securities regulation.
Why is commercial speech not protected by the First Amendment? ›
Commercial speech is a form of protected communication under the First Amendment, but it does not receive as much free speech protection as forms of noncommercial speech, such as political speech. One important test developed by the Court to determine protection for commercial speech is the Central Hudson test.
What is the First Amendment right against compelled speech? ›
First Amendment: Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof; or abridging the freedom of speech, or of the press; or the right of the people peaceably to assemble, and to petition the Government for a redress of grievances.
What is the issue of free speech as it relates to the First Amendment? ›
The First Amendment to the U.S. Constitution protects the freedom of speech, religion and the press. It also protects the freedom to peacefully assemble or gather together or associate with a group of people for social, economic, political or religious purposes, as well as the right to protest the government.
Why are people against ESG? ›
“They may also argue that considering ESG factors could conflict with a fiduciary's duty to act in the best financial interests of plan participants. Some opponents also believe that ESG investing is politically motivated and could lead to biased investment decisions.”
What is the ESG issue? ›
ESG issues are essentially business issues, categorized as environmental, social, or governance in nature. They are sustainability-related considerations on par with traditional financial factors like economic contributions and financial returns.
Are there any types of speech not protected under the First Amendment? ›
Certain types of speech, like perjury, blackmail, and child p*rnography are not protected under the First Amendment. Additional examples of unprotected speech include: True threats.
Is commercial speech false or misleading? ›
Commercial speech is no longer outside of the First Amendment, but it still gets somewhat less protection than other speech. To limit it, the government must show that the commercial speech in question is fraudulent, misleading or about an illegal product.
What kind of commercial speech may be prohibited? ›
Commercial speech may be banned if it is false or misleading or if it advertises an illegal product or services. How Can Commercial Speech be Regulated? If speech is found to be commercial and not false or misleading, it can be regulated.
What is the problem with compelled speech? ›
Compelled speech violates the freedom of conscience
Not only is this a violation of an individual's right to free speech; it is also a violation of their right to act according to their own conscience.
The U.S. Supreme Court unanimously rules that speech advocating the use of force or crime is not protected if (1) the advocacy is “directed to inciting or producing imminent lawless action” and (2) the advocacy is also “likely to incite or produce such action.”
Is compelled speech content-based? ›
The Supreme Court has recognized that laws restricting or compelling speech based on its content have the potential to expel certain ideas or viewpoints from public debate. The Court typically regards such “content-based laws” as “presumptively unconstitutional.” Reed v. Town of Gilbert, 576 U.S. 155, 163 (2015).
Why was the students speech not protected under the 1st Amendment? ›
In a 7-2 vote, the court found a violation of the First Amendment speech rights of students and teachers because school officials had failed to show that the student expression caused a substantial disruption of school activities or invaded the rights of others. In later cases — Bethel School District No. 403 v.
What are the limitations of the First Amendment freedom of speech? ›
Categories of speech that are given lesser or no protection by the First Amendment (and therefore may be restricted) include obscenity, fraud, child p*rnography, speech integral to illegal conduct, speech that incites imminent lawless action, speech that violates intellectual property law, true threats, false ...
What is the penalty for violating the First Amendment? ›
Aside from occasional public disapprobation, there is no penalty for violating the Constitution generally or the First Amendment in particular.
What is the backlash of ESG? ›
Negative rhetoric surrounding ESG (Environmental, Social and Governance) has intensified into a rapidly escalating backlash in 2024. Vocal critics, who say ESG principles have no bearing on business performance, have dubbed it “woke capitalism,” warning of “ESG cartels” advancing a “secret liberal political agenda.”
What are the 23 ESG controversy topics? ›
ESG controversies score consists of 23 ESG controversy topics, including anti-competition, business ethics, intellectual property, tax fraud privacy, environmental issues, diversity & opportunity, etc. The default value of all controversy measures is 0, meaning companies with no controversies will get a score of 100%.
What makes ESG ratings problematic? ›
Main Problems with Data Used by ESG Rating Agencies. Lack of quality data is traditionally identified as the main barrier to the objectivity of ESG ratings.
What are the ESG disagreements? ›
Disputes that may arise
ESG claims can be based on a wide spectrum of legal grounds, including tort, breach of fiduciary duty, claims for misstatement/misrepresentation, and under company and securities law.
