SEC decides to stop supporting climate risk disclosure rule

The Securities and Exchange Commission (SEC) made a significant decision today by voting to abandon its defense of the climate risk disclosure rule. This rule aimed to necessitate companies to report climate-related financial risks and greenhouse gas emissions. The next likely step for the agency will involve removing the rule from the Code of Federal Regulations, which will initiate a public comment period. This move comes after SEC Acting Chair Mark Uyeda called for a pause in the proceedings in February, citing the need for further Commission deliberation. Uyeda and Commissioner Hester Peirce, who both opposed the rule, currently form the majority of the Commission.

While the SEC is taking a step back, California is making progress with its own climate-related disclosure laws that were passed in 2023. These laws apply to many of the same companies that would have been covered by the now abandoned SEC rule. Additionally, several other states are contemplating legislation to mandate similar disclosures.

Ben Cushing, the director of the Sierra Club’s Sustainable Finance campaign, expressed concern at the news, highlighting the dangers of this decision. He emphasized that climate change is an escalating financial risk, and by discontinuing the defense of the climate disclosure rule, the SEC is jeopardizing investor protection. Cushing pointed out that concealing climate risks does not make them any less real, but rather, it hinders investors from efficiently managing them and safeguarding their long-term savings. He criticized the SEC for trying to keep investors uninformed precisely when transparency and action are most critical, emphasizing that states nationwide are stepping in to prevent corporations from evading their climate risks.

The climate disclosure rule, officially known as “The Enhancement and Standardization of Climate-Related Disclosures for Investors,” was adopted in March 2024. The rule aimed to compel companies to disclose standardized, comparable information to investors regarding financially significant climate-related financial risks. Not long after its adoption, industry groups and their political affiliates challenged the new requirements in court. In August 2024, the Sierra Club and other organizations submitted an amicus brief in the 8th Circuit to uphold the SEC’s authority to enact the rule, despite certain perceived weaknesses in the original proposal.

Throughout the rulemaking process, the proposed disclosure requirements garnered immense support from investors. Various institutional investors, representing assets worth trillions of dollars, overwhelmingly supported the proposed rulemaking. The rule would have necessitated a range of climate-related disclosures, including companies’ Scope 1-3 greenhouse gas emissions.

In conclusion, the Sierra Club, a prominent environmental organization in the United States, plays a crucial role in promoting clean energy, ensuring community well-being, protecting wildlife, and conserving natural spaces. The organization’s work encompasses grassroots activism, public education, lobbying efforts, and legal action to achieve its mission and uphold environmental values. For more information about the Sierra Club, interested parties can visit their official website.