In April, our readers will recall that we reported on some pushback raised regarding the new climate disclosure rules promulgated by the U.S. Securities and Exchange Commission requiring publicly traded registrants to provide certain climate-related information in future registration documents and annual reports (the “Final Rules”).
As SEC Chairman Gary Gensler said in a press release announcing the new disclosure rules, the Final Rules were meant to “reflect the Commission’s efforts to respond to investors’ demand for more consistent, comparable, and reliable information about the financial effects of climate-related risks on a registrant’s operations and how it manages those risks while balancing concerns about mitigating the associated costs of the rules.”
While these Final Rules would not have gone into effect until after 60 days from their March 6 announcement (or May 4), their implementation may take a little longer now. In response to the almost-immediate litigation filed in both the Fifth and Eighth Circuit Courts of Appeals seeking judicial review of the Final Rules, on April 4, the SEC published an Order Issuing Stay of these rules. A review of the stay indicates the SEC wishes to allow for an orderly judicial determination of the at least 10 states that have filed petitions challenging these new disclosure rules. The Order Issuing Stay also is meant to prevent regulatory uncertainty for companies registering with the SEC if the Final Rules went into effect during the pending judicial resolution.
Despite publishing the Order Issuing Stay, the SEC made it clear in their publication that the Final Rules are consistent with applicable law and the SEC’s “long-standing authority to require the disclosure of information important to investors making investment and voting decisions.”
The important aspects to note about this Order Issuing Stay is that the SEC published it pursuant to its discretionary statutory authority found in 15 U.S.C. § 78y(c)(2) (“Until the court’s jurisdiction becomes exclusive, the Commission may stay its order or rule pending judicial review if it finds that justice so requires.”) and the American Procedure Action 5 U.S.C. § 705. The Order does not however stem from a judicial order, yet. A judicial stay order will likely follow once exclusive jurisdiction is found in at least one of the multitude of challenges to the Final Rules.
So, publicly traded companies do not, as originally thought, have to provide this climate-related information in their SEC filings as of May 4. They can instead wait and see how the litigation of the Final Rules plays out before implementing these disclosures. While unlikely, it is still theoretically possible that the litigation surrounding the Final Rules resolves sooner rather than later, meaning the reporting deadlines outlined in the Final Rules would still apply. If that happens, larger companies will still have to make their first disclosures in 2026 and would be wise to continuing to prepare to do so.
The more likely scenario, however, is that the litigation dealing with these Final Rules will take a bit of time to get sorted out in the courts. Those opposed to the Final Rules could even potentially (and likely will) drag the litigation out past the November election meaning the compliancy deadlines listed in the Final Rules would also get extended.
Meanwhile, public companies should recognize that still in effect are the disclosure requirements for climate-related matters outlined in the SEC’s 2010 climate disclosure guidance.
