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The US Securities and Exchange Commission (SEC) paused the official adoption of its Climate Disclosure Rules after legal petitions were filed by various US States, companies, industry groups and NGOs. The SEC decided to “stay” the rules to allow for the Court of Appeal to decide on the merits of the arguments raised by the various stakeholders. 
  • On 4 April 2024, the US Securities and Exchange Commission (SEC) announced it was pausing the official adoption of its Climate Disclosure Rules, the first nationwide climate disclosure rule in the US.
  • The Climate Disclosure Rules were published by the SEC on 6 March 2024. Immediately following the publication, over a dozen legal petitions were filed against SEC in multiple Courts of Appeals in the US. Petitions were filed by US States, companies, civil society, and industry groups including the US Chamber of Commerce, the Texas Alliance of Energy Producers, the National Legal and Policy Center, and the Oil and Gas Workers Association.
  • Industry groups have argued that SEC does not have the legal authority to require such detailed disclosures on environmental matters, and that the rules will burden companies and “alter their behaviour far more than ordinary financial disclosures”. The US Chamber of Commerce stated that SEC’s rules are an “unlawful and excessive government overreach at the state and federal levels” and that the “unnecessarily prescriptive” regulation undermines responsible efforts by businesses to address climate risks.  Legal petitions from industry groups called out the need for
    • A less prescriptive approach to certain rules
    • Removing Scope 1 and Scope 2 disclosure requirements
    • Extending a safe harbour from private liability for certain disclosures
    • Extending certain phase-in periods.
  • Civil society groups legal petitions argue that SEC’s rules do not go far enough. In its petition, the Natural Resources Defense Council challenged SEC’s decision to remove Scope 3 emissions from the final rules. Sierra Club argued that the SEC had “fallen short of its statutory mandate to protect investors” by allowing companies to selectively report their emissions.
  • The disclosure provisions relating to Scope 3 emissions were removed from the rules following a public consultation in 2022-2023. More than 24,000 comment letters were submitted to the SEC during the consultation.
  • SEC has announced that it will “stay” the official adoption of the rules to allow for the Court of Appeal to decide on the merits of the various petitions, but stating that it intends to “vigorously defend” the rules in Court.

About the SEC’s Climate Disclosure Rules  

  • The SEC Climate Disclosure Rules will require publicly listed companies to disclose climate-related risks in their SEC filings, such as annual reports and registration statements. The rules will be adopted as amendments to the Securities Act of 1933 and Securities Exchange Act of 1934. 
  • The rules will require listed companies to disclose
    • Climate-related risks that have had or are likely to have a material impact on the company’s business strategy, operations, or finances  
    • Any board oversight of climate-related risks and any role by management in assessing and managing the company’s material climate-related risks 
    • The actual and potential material impacts of any identified climate-related risks on the company’s strategy, business model, and outlook 
    • Any processes the company has for identifying, assessing, and managing material climate-related risks and, whether, and how these processes are integrated into the overall risk management system   
    • Information about the company’s activities to mitigate or adapt to a material climate-related risk, and climate-related targets or goals, and whether they are likely to materially affect the business, operations, or finances 
    • Material Scope 1 emissions and/or Scope 2 emissions for large companies.  
  • The SEC Climate Disclosure Rules will need to be published in the Federal Register to be officially adopted and will enter into force 60 days afterwards.  Compliance dates for the rules vary based on companies’ SEC filer status. Once adopted, large companies with a public float of $700 million will be required to start reporting fiscal year beginning 2025 and will need to report on their scope 1 and 2 emissions from 2026. 
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