Federal Court Halts SEC Rules Requiring Climate Change Disclosure
In a significant development, a federal court has temporarily halted new rules from the Securities Exchange Commission (SEC) that would have required public companies to disclose more about the business risks they face from climate change. The court sided with two oil and gas companies that criticized the requirements as costly and arbitrary.
The rules, approved by the SEC earlier this month, would have mandated some publicly traded companies to disclose their climate risks and greenhouse gas emissions. However, industry groups and their political allies have filed multiple lawsuits challenging the regulation.
The U.S. Chamber of Commerce and ten Republican-led states have filed suits to stop the rules, arguing that they are unconstitutional. The emergency stay granted by Fifth Circuit judges on Friday came in response to a case brought by two fracking companies, Liberty Energy and Nomad Proppant Services, who claimed that the rules were arbitrary and violated the First Amendment by mandating discussions about climate change.
The companies argued that the rules would impose irreparable compliance costs and that there was no clear authority for the SEC to regulate the issue of climate change. They also contended that the rules would harm businesses and individuals, as climate disasters like hurricanes, floods, and droughts continue to take a toll on the economy.
Environmental groups have also challenged the rules, criticizing the SEC for not going far enough to protect investors. They argue that as climate impacts disrupt the economy, companies should be required to fully disclose the climate risks they pose.
Initially, the SEC had proposed that large companies disclose emissions not only from their own operations but also along their value chain. However, after objections from businesses, the requirement was removed, and only the largest companies would need to report direct emissions that affect their bottom lines.
Despite objections from the SEC, the Fifth Circuit granted the emergency stay, delaying the implementation of the rules until at least March 2026. The outcome of this legal battle will have significant implications for how companies disclose their climate risks and emissions in the future.
