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SEC stays climate-disclosure rules pending resolution of appeals court case

On Behalf of | Apr 12, 2024 | Securities and Compliance

The Securities and Exchange Commission has decided to stay its new climate-disclosure rules pending an appeals court review of the case, Reuters reports.

The rules have been the subject of multiple legal challenges that have now been consolidated in the U.S. Court of Appeals for the Eighth Circuit for its consideration.

On March 6, the SEC voted 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.

The commission dropped a requirement that would have had companies report some indirect emissions known as Scope 3 that happen along a company’s supply chain.

Oil companies and Republican attorneys general filed suit to block the rules, saying they go beyond the SEC’s authority under U.S. securities law, are too costly and onerous, and represent an attempt to bring the SEC into climate policy by requiring disclosure of information about greenhouse gas emissions and other climate concerns.

The 5th U.S. Circuit Court of Appeals had temporarily stayed the rule last month and the case was then assigned to the 8th Circuit Court of Appeals.

In a letter to the 8th U.S. Circuit, the SEC said it would pause implementation of the rules but added it would continue vigorously defending its contention that rules requiring public companies to disclose climate risk are both “consistent with applicable law” and within its authority.

But “given the procedural complexities” of a slew of lawsuits against the rule, the SEC said a stay would “facilitate the orderly judicial resolution of those challenges and allow the court of appeals to focus on deciding the merits.”  The commission said it also wants to avoid regulatory uncertainty for companies that might have been subject to the rule while litigation against it proceeds.

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