On April 4, 2024, the Securities and Exchange Commission (SEC) pressed the pause button on the implementation of its recently approved climate disclosure rules for public companies until several legal challenges can be resolved by the U.S. Court of Appeals for the Eighth Circuit.
The voluntary stay came after the SEC scaled back its previously proposed climate disclosure rules in the final, approved version, which omitted the controversial and burdensome requirement that public companies must report Scope 3 emissions (emissions generated up and down a company’s value chain).
While acknowledging that it has the discretion to stay its own rules where “justice so requires,” the SEC vowed that it "will continue vigorously defending the Final Rules’ validity in court."
The SEC faces stiff opposition from the U.S. Chamber of Commerce and a number of states that contend the SEC exceeded its rulemaking authority by attempting to regulate the environmental impact of U.S. public companies. On April 3, 2024, eighteen other states filed a motion to intervene in the suit to support the SEC’s climate disclosure rule.
For its part, the SEC claims that climate disclosure rules are critical to its objective of ensuring that investors receive consistent and comparable data concerning the risks that the climate poses to public companies (and vice versa) and how, if at all, those companies are addressing those risks.
With a stay of the final rule in place pending the outcome of the existing and any future legal challenges, it is unclear when, or if, the climate disclosure rule will become effective.
The stay did not affect the SEC’s 2010 guidance on disclosures related to climate change. Public companies should continue to monitor developments and should reasonably expect that investors and other important stakeholders will continue to demand the disclosure of climate-related risks.
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