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New SEC climate-disclosure rules temporarily halted by appeals court

On Behalf of | Mar 18, 2024 | Securities and Compliance

The Securities and Exchange Commission’s new rules requiring climate-related disclosures by public companies are on hold for now due to a legal challenge, according to the Wall Street Journal.

Oil-field-services companies Liberty Energy and Nomad Proppant Services filed a lawsuit to stop the SEC regulations, and the Fifth U.S. Circuit Court of Appeals granted their request for an administrative stay.

By a 3-2 vote on March 6, the SEC decided to mandate material climate risk disclosures to investors by public companies and in public offerings. The commission said it was taking the action to enhance and standardize these disclosures as a way to provide investors with more consistent, comparable, and reliable information about how companies are dealing with climate-related risks, including greenhouse gas emissions. Firms would have to explain how they are managing those risks while also balancing concerns about mitigating the costs of the rules on their operations.

In their court filings, Liberty and Nomad said the rules go beyond the SEC’s authority under U.S. securities law, and that they are a “thinly veiled attempt” to bring the SEC into climate policy by requiring disclosure of a “breathtaking volume of information” about greenhouse gas emissions and other climate concerns.

They added that companies’ compliance costs would amount to over $4 billion and could also leave firms facing increased litigation.

The appeals court did not give a reason for granting the stay, but for now the SEC will not be able to enforce the rule until the court decides on the arguments presented by the two companies.

At least 25 states along with the U.S. Chamber of Commerce have also filed legal challenges to the rule, with the states calling it illegal and unconstitutional.

The SEC argued there was no need for a temporary stay, since no disclosures would be required by companies before March 2026 at the earliest.   An SEC spokesperson said the agency will “vigorously defend the final climate risk disclosure rules in court.”

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