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The U.S. Securities and Exchange Commission announced that it has paused the implementation of its recently released climate disclosure rules requiring companies to report on climate-related risks and greenhouse gas (GHG) emissions, as it awaits a court review of the new rules following a series of legal challenges by several states and business groups.
Despite the decision to pause the rules, however, the SEC said in a statement that it will “continue vigorously defending” the new climate disclosure requirements, which it described as “consistent with applicable law and within the Commission’s long-standing authority.”
The SEC announced the release and adoption of new rules in early March, 2 years following the Commission’s initial draft release, establishing for the first time requirements for public companies in the U.S. to provide disclosure on climate risks facing their businesses, plans to address those risks, the financial impact of severe weather events, and, in some cases, greenhouse gas emissions originating from their operations.
Right out of the gate, however, and even prior to its final release, the new rule has faced a series of legal challenges, including a court petition filed by energy services companies Liberty Energy and Nomad Proppant, requesting the stay pending a review of the rule,which was granted by the court, as well as a lawsuit against the rule filed by 25 Republican state attorneys general, led by Iowa AG Brenna Bird, and another appeals court motion requesting a stay of the rules led by the U.S. Chamber of Commerce.
Arguments against the rules claim that the requirements are too onerous and expensive for companies, that the information requested, including GHG emissions data, is not reliable or overly speculative, and that the rules exceed the SEC’s authority.
Following the Republican states’ lawsuit, a coalition of 19 Democratic AGs launched a campaign to defend the SEC rule, filing a motion earlier this week to intervene in the case. The motion argues that the rule will provide investors with “standardized, comparable, and reliable data,” enabling the evaluation of climate-related risks.
The SEC statement announcing its move to pause the climate disclosure rule following the court challenges explained that the stay “will facilitate the orderly judicial resolution of those challenges and allow the court of appeals to focus on deciding the merits,” and added that the stay will also avoid uncertainty in the event that the rules were implemented while the cases were still pending.
“The Commission will continue vigorously defending the validity of the Final Rules in court and look forward to an expeditious resolution of the litigation,” the statement continued.