On April 4, 2024, less than one month after their adoption, the U.S. Securities and Exchange Commission ("SEC") has chosen to stay its newly adopted climate disclosure rules, pending judicial review (the "Final Rules"). The SEC has discretion to do so pursuant to relevant statutes if it finds that "justice so requires.” According to the SEC's order, the SEC “has determined to exercise its discretion to stay the Final Rules pending the completion of judicial review of the consolidated Eighth Circuit petitions."
The order references the many petitions filed in court following the March 6, 2024 adoption of the Final Rules that sought their review,1 as well as the judicial order consolidating several petitions in the U.S. Court of Appeals for the Eighth Circuit (the "Eighth Circuit")2 and the lifting of the stay originally granted by the U.S. Court of Appeals for the Fifth Circuit.3 On April 1, several proponents had filed motions for a stay with the Eighth Circuit and urged the court to expedite briefing on the "already-filed and imminently forthcoming emergency stay motions."4
In its order, the SEC stated that it "is not departing from its view that the Final Rules are consistent with applicable law" and that it "will continue vigorously defending the Final Rules' validity in court. However, the SEC acknowledged that "given the procedural complexities accompanying the consolidation and litigation of the large number of petitions for review of the Final Rules, a Commission stay will facilitate the orderly judicial resolution of those challenges… and avoids potential regulatory uncertainty if registrants were to become subject to the Final Rules' requirements during the pendency of the challenges to their validity."
While this development will likely delay the ultimate effective date of the Final Rules, companies should continue their ongoing compliance assessment efforts, albeit on a less accelerated timeline, to prepare for the potential effectiveness of the Final Rules. In addition, the SEC reiterated in its order that the existing disclosure guidance around climate remains in effect, and the SEC is expected to continue to review and comment on disclosures based on its climate disclosure guidance issued in 2010 and its sample comment letter issued in September 2021 (for a description of recent SEC comments, see the "Climate and Sustainability Disclosure" section of our recent client alert).5 Going forward, companies should consider the Final Rules when assessing their climate disclosures both in SEC filings and in sustainability reports on corporate websites, along with investor and stakeholder interest and pending and/or enacted legislation from other jurisdictions (e.g., the European Union and California).6
1 Nat. Res. Def. Council, Inc. v. SEC, No. 24-707 (2d Cir. filed Mar. 12, 2024); Liberty Energy Inc. v. SEC, No. 24-60109 (5th Cir. filed Mar. 6, 2024); Louisiana v. SEC, No. 24-60109 (5th Cir. filed Mar. 7, 2024); Tex. All. of Energy Producers v. SEC, No. 24-60109 (5th Cir. filed Mar. 11, 2024); Chamber of Commerce of U.S. of Am. v. SEC, No. 24-60109 (5th Cir. filed Mar. 14, 2024); Ohio Bureau of Workers' Comp. v.
2 SEC, No. 24-3220 (6th Cir. filed Mar. 13, 2024); Iowa v. SEC, No. 24-1522 (8th Cir. filed Mar. 12, 2024); West Virginia v. SEC, No. 24-10679 (11th Cir. filed Mar. 6, 2024); Sierra Club v. SEC, No. 24-1067 (D.C. Cir. filed Mar. 13, 2024).
3 On March 19, 2024, the Commission filed a Notice of Multicircuit Petitions for Review with the Judicial Panel on Multidistrict Litigation pursuant to 28 U.S.C. § 2112(a)(3). On March 21, 2024, the Judicial Panel on Multidistrict Litigation issued an order consolidating the petitions for review in the U.S. Court of Appeals for the Eighth Circuit.
On March 22, 2024, the Fifth Circuit dissolved its administrative stay. See ECF No. 87, Liberty Energy Inc. v. SEC, No. 24-60109 (5th Cir. Mar. 22, 2024).
4 ECF No. 5379427, at 3, Iowa v. SEC, No. 24-1522 (8th Cir. filed Apr. 1, 2024).
5 See Footnote 8 of the order, in which the SEC expressly indicated that the order "… does not stay any other Commission rules or guidance. See, e.g., Commission Guidance Regarding Disclosure Related to Climate Change, Rel. Nos. 33-9106; 34-61469 (Feb. 2, 2010), 75 Fed. Reg. 6290 (Feb. 8, 2010)."
6 For example, the EU adopted the Corporate Sustainability Reporting Directive in 2023, and California has adopted Senate Bills 261 and 531. See our alerts, "Corporate Sustainability Reporting: New EU rules for large companies and listed SMEs" and "California Bills to Require Greenhouse Gas Emissions Reporting From Companies Doing Business in the State" for more information.
