Ten States Sue to Block SEC ‘Climate Disclosure Rule’ Before the Ink is Dry.

[jim]

Ten States Sue to Block SEC ‘Climate Disclosure Rule’ Before the Ink is Dry.
In a significant legal challenge to the Securities and Exchange Commission (SEC), a coalition of ten states, led by West Virginia Attorney General Patrick Morrisey, has filed a lawsuit contesting the SEC’s newly released regulations that mandate companies to disclose their carbon emissions. The states argue that the SEC has overstepped its .rulemaking authority and that the rules infringe upon the First Amendment rights of the companies.

The lawsuit, which was filed shortly after the rules were finalized, contends that the SEC’s actions are not only beyond its statutory authority but also arbitrary, capricious, and not in accordance with law. The states are seeking a declaration from the court that the rules are unlawful and an order vacating the commission’s finalization of the rules.

The SEC’s climate disclosure rule has been a contentious issue, with debates centering around the extent of the agency’s authority to require public companies to report climate-related risks. The final rule, which was scaled back from its original proposal, eliminated the requirement for companies to disclose Scope 3 emissions, which pertain to indirect sources such as consumers or supply chain providers.

Despite these modifications, the states maintain that the rule is still flawed and presents significant legal issues. The legal battle is expected to escalate, potentially reaching the U.S. Supreme Court, as it raises fundamental questions about the role of regulatory agencies in governing corporate disclosures related to environmental and social governance (ESG) issues.

The SEC, for its part, has defended the rule, stating that it was drafted in consideration of the economics of climate disclosures, public feedback, and the Administrative Procedure Act, which governs agency rulemaking. SEC Chair Gary Gensler has expressed confidence that the rules are within the law and that the SEC will vigorously defend them in court.

This lawsuit marks a pivotal moment in the ongoing debate over ESG disclosures and the extent of regulatory oversight. It underscores the deep divisions on policy approaches to climate change and the role of government in addressing this global challenge. As the legal proceedings unfold, the outcome will have significant implications for the future of climate-related reporting and the broader ESG landscape.

[Author]

March 13, 2024 at 4:03 PM