SEC stays climate-risk disclosure rule as it works through legal challenges

By Staff
3 Min Read

Dive Brief:

  • The Securities and Exchange Commission announced Thursday afternoon it will halt implementation of its climate-risk disclosure rule as it faces several challenges in the U.S. Eighth Circuit of Appeals.
  • The agency is facing nine petitions challenging the rule, including attempts to have the rule paused by multiple parties. After 31 petitioners filed a motion earlier this week rejecting the SEC’s request to have a consolidated briefing on all lawsuits filed, the agency said it will exercise its discretion to pause the rule until the review of its legal challenges has been completed, according to the order.
  • Despite issuing the stay, the SEC said in the order it still believes the rule is consistent with applicable laws and it is “within the Commission’s long-standing authority to require the disclosure of information important to investors in making investment and voting decisions.”

Dive Insight:

The climate rule was finalized March 6 and immediately drew legal challenges, despite eliminating requirements to disclose scope 3 emissions and scaling back requirements to report scope 1 and 2 emissions. The rule had been temporarily halted once before, when a petition brought forward by Liberty Energy and Nomad Proppant Services was still pending in the Fifth Circuit of Appeals. That pause was dissolved when all of the cases were transferred to the Eighth Circuit.

Liberty Energy and Nombad Proppant Services had sought to get the pause reinstated by the Eighth Circuit and asked the court to rule on its motion briefing from the prior Circuit. The SEC countered by saying an immediate pause was not necessary and their stay petition should be combined with one filed by the U.S. Chamber of Commerce and two other organizations. 

In its Thursday order, the agency said that, given the large number of challenges and the complex legal procedures around the case consolidation and litigation, it believes staying the rule “will facilitate the orderly judicial resolution of those challenges and allow the court of appeals to focus on deciding the merits.”

Additionally, the agency said a stay avoids the potential that any litigants would become subject to the climate disclosure rules while the litigation is taking place. Given the first disclosures would not be required until fiscal year 2026, the SEC is preparing for the possibility litigation could stretch out.

The SEC said in the order that it “will continue vigorously defending the Final Rules’ validity in court and looks forward to expeditious resolution of the litigation.”

The SEC declined to comment beyond what was included in the order.

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