The U.S. Securities and Exchange Commission (SEC) is currently defending its new climate reporting rule amid several legal challenges. The SEC argues that the rule provides critical information for investors and is well within its regulatory authority. Filed recently with the U.S. Eighth Circuit Court of Appeals, the SEC’s brief highlights that climate-related risks and how companies address them can significantly impact financial performance. The brief also underscores that current reporting practices are inconsistent and difficult for investors to compare, which hampers decision-making. The new rules, announced in early March after two years of deliberation, require public companies to disclose climate-related risks, their plans to manage these risks, the financial impact of severe weather events, and, in some cases, their greenhouse gas (GHG) emissions. This is the first time such requirements have been imposed on US public companies. After the law was published, legal challenges continued, including nine lawsuits filed within ten days.
Those challenges include a lawsuit by 25 Republican attorneys general, led by Iowa Attorney General Brenna Byrd, and a request for the U.S. The Chamber of Commerce. Opponents argue that the law’s requirements are too burdensome and expensive, and question the reliability of requested information, such as transmission data. They also say the SEC has more power. In response, the SEC has suspended implementation of the rule pending review of these proposals, but remains committed to protecting the new requirements. In its filings, the SEC has emphasized the need for more accurate weather-related information to meet the growing demand of investors. He also addressed concerns about compliance costs by pointing out that the rules from the original proposal were designed to balance investor interests with cost considerations. The Securities and Exchange Commission believes that its jurisdiction extends to disclosures that are critical to investment decisions and voting decisions, and considers this a matter of investor protection rather than water policy.