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SEC Delays Climate-Related Disclosures: What Investors Need to Know

The US Securities and Exchange Commission (SEC) announced a delay in the effective date of implementation of its final rules on climate-related disclosures on April 4, 2024. 

These long-awaited rules were adopted by the Commission on March 6, 2024, and published in the Federal Register on March 28, 2024. These rules were made with investors’ interests in mind. They provide credible and comparative information about the financial impacts of climate-related risks on a company’s operations and the company’s policies for mitigating those risks.

The final rules were to come into effect on May 28, 2024, with implementation phased in, beginning with the fiscal year 2025. However, following the SEC’s announcement, the implementation has been delayed indefinitely until the completion of the judicial review of the consolidated Eighth Circuit petitions. 

This delay resulted from the legal issues gilded by various business groups after the adoption of the climate-related disclosure rules. 

 

Legal Challenges Surrounding SEC’s Climate Disclosure Rules 

The Securities and Exchange Commission’s approval of Final Rules sparked a storm of petitions and appeals. These rules require registrants to provide specific climate-related information in their registration statements and annual reports.

  • The final rules adopted by the SEC faced immediate opposition. Between March 6 and March 14, 2024, multiple petitions were filed in various courts of appeals challenging the legality of the decisions.
  • On March 8, 2024, petitioners Liberty Energy Inc. and Nomad Proppant Services LLC sought administrative and judicial review. It led to the issue of an administrative stay by the Fifth Circuit on March 15, 2024. 
  • Further complicating matters, the Commission filed a Notice of Multi Circuit Petitions for Review with the Judicial Panel on Multidistrict Litigation. On March 21, 2024, the Judicial Panel on Multidistrict Litigation consolidated the petitions for review in the US Court of Appeals for the Eighth Circuit. 
  • On March 22, 2024, the Fifth Circuit dissolved the administrative stay. 
  • On March 26, 2024, different entities, including the Chamber of Commerce of the United States of America, the Texas Association of Business, and the Longview Chamber of Commerce, filed additional applications for stays pending judicial review. 
  • Recognizing the efficiencies for the parties and the Court, the SEC filed a motion on March 29, 2024, to establish a consolidating briefing schedule. It included all the motions seeking a stay of the final rules pending judicial review. 
  • On April 1, 2024, thirty-one petitioners opposed this consolidated briefing schedule and urged the Court to expedite the review process.   

Also read – New Rules by SEC for Standardizing Climate-Related Disclosures

Bottom Line 

While issuing a stay, the SEC determined that the final rules comply with applicable law and the SEC’s power to disclose critical information to investors. Therefore, the Commission remains committed to vigorously defending its legality. However, given the complex procedural landscape involving the consolidation and litigation of several petitions for review, the Commission believes a stay is necessary.

The decision to impose a stay is intended to aid the orderly judicial resolution of challenges and allow the Court of Appeals to focus on deciding the merits. Additionally, it reduces possible regulatory ambiguity for registrants while the challenges are pending. This move is consistent with the Commission’s previous practice of delaying rules awaiting judicial review in similar circumstances.

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