By Allen Campbell, JD, MBA
On March 6, 2024, the US Securities and Exchange Commission amended its controversial proposed rules that would require registrants to provide climate-related information in their registration statements and annual reports (the “Final Rules”).
But less than a month later, on Thursday, April 4, 2024, the SEC said it is staying the implementation of the Final Rules. The stay will remain in place pending the outcome of several cases that have been filed against the SEC with respect to the Final Rules. All of those cases have been placed in the hands of one court, the Court of Appeals for the Eighth Circuit – which should in due course serve the goal of certainty. In the words of the SEC, “the Final Rules are stayed pending the completion of judicial review of the consolidated Eighth Circuit petitions.”
The SEC is not backing down on the merits of the Final Rules, which it says are consistent with applicable law and within the Commission’s long-standing authority to require the disclosure of information that is important to investors in making investment and voting decisions. The Commission says it will continue to vigorously defend the Final Rules’ validity in court.
Key Takeaways
The Final Rules are very important. If upheld, they will change how companies report on climate-related matters, and make no mistake, such disclosures will spur corporate actions intended to reduce global warming.
The actions of the judicial system in consolidating the cases, and the SEC’s response, can be defended as thoughtful means to bring order to what could have been judicial chaos.
What should companies do now?
Given the global movement toward holding companies accountable for their greenhouse gas (GHG) emissions, large and medium-size companies and publicly held companies will be wise to get their reporting systems in place soon – and to start or continue their climate-risk-related and GHG-reduction programs.
Companies can expect to find themselves being required to comply with other new laws and with demands from investors and supply-chain partners to report on and improve their GHG emissions performance.