The U.S. Securities and Exchange Commission (SEC) is defending its new climate reporting rule in court, arguing that the proposed disclosures are crucial for investors. In a brief filed with the U.S. Eighth Circuit Court of Appeals, the SEC emphasized that climate-related risks and a company’s response to them can significantly impact financial performance. The SEC argued that current reporting on these risks is inconsistent and hard to compare, which hinders investors’ ability to make informed decisions. The climate disclosure rules, released in early March, require U.S. public companies to report on climate risks, plans to address those risks, the financial impact of severe weather events, and, in some cases, greenhouse gas emissions. The rules faced immediate legal challenges, including lawsuits from 25 Republican state attorneys general and the U.S. Chamber of Commerce, who argued that the requirements are overly burdensome, expensive, and exceed the SEC’s authority.
The SEC suspended implementation of the rule in April pending a review of those legal challenges, but has signaled its intention to defend the new requirements. The Commission states that this rule is necessary to provide the consistent, relevant, and consistent information that investors need to guide their decisions. The SEC also said it designed the final rule to reduce compliance costs and ensure that disclosures are useful to investors.