The SEC has actively defended its newly established climate reporting rules, which have sparked a flurry of legal challenges.
According to ESG Today, the rules, introduced in early March and the first of their kind, mandate U.S. public companies to disclose the climate risks facing their businesses, strategies to mitigate these risks, the financial impacts of severe weather events, and their greenhouse gas (GHG) emissions.
The SEC’s recent brief to the U.S. Eighth Circuit Court of Appeals underlines the necessity for “more detailed, consistent, and comparable information” on climate risks. This demand comes in response to substantial investor calls for enhanced disclosures to aid investment and voting decisions. The Commission is responding to inconsistencies and the difficulty investors face in making informed decisions due to current reporting standards, which it describes as inconsistent and hard to compare.
Facing opposition from various fronts, including 25 Republican state attorneys general and the U.S. Chamber of Commerce, the rules have been criticised for being overly burdensome and speculative in terms of the requested information, such as GHG emissions data. Despite these challenges, the SEC has paused the rule’s implementation to review the legal petitions but remains committed to its enforcement. “We continue vigorously defending the new disclosure requirements,” the Commission stated in its filings.
The SEC also countered arguments about the costs of compliance, explaining that the rules had been modified from their initial 2022 proposal to reduce costs and increase utility for investors. Furthermore, the Commission clarified that its mandate does not extend to regulating climate change per se but focuses on investor protection, aligning with Congress’s authority granted to the Commission to require significant investor information.
“This case is not about climate change or environmental policy; it is about protecting investors,” the SEC clarified in its brief, positioning the climate disclosure rule as a critical tool for transparent financial reporting rather than environmental regulation.
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