On April 4, 2024, the U.S. Securities and Exchange Commission (SEC) issued an order (the Order) implementing a stay of its final climate-related disclosure rules1 adopted on March 6, 2024 (the Final Rules). For more information on the Final Rules, please see our previous client alert.
Following adoption of the Final Rules, several legal challenges emerged asserting, in most cases, that the Final Rules were too far reaching and, in other cases, did not reach far enough. The legal challenges to the Final Rules across the U.S. federal courts have been consolidated and will be reviewed by the U.S. Court of Appeals for the Eighth Circuit (the Eighth Circuit).
In its Order, the SEC indicated that it intended to “avoid potential regulatory uncertainty” if companies were to become subject to the Final Rule’s requirements during the pendency of the legal challenges. In addition, the SEC stated that while it believes the Final Rules fall within the SEC’s authority, the stay will “facilitate the orderly judicial resolution” of current legal challenges to the Final Rules, allowing the Eighth Circuit to “focus on deciding the merits” of the consolidated case. Finally, the SEC noted that the stay of the Final Rules is limited to the rules challenged in the litigation pending in the Eighth Circuit and does not stay any other rules or SEC guidance. Therefore, the 2010 SEC Guidance Regarding Disclosure Related to Climate Change continues to be relevant and applicable.
What to Do Now?
The SEC stayed the Final Rules pending the completion of the judicial review of the consolidated petitions in the Eighth Circuit. Companies should continue to consider existing disclosure obligations related to climate-related matters. The stay is anticipated to impact companies differently based on specific sustainability drivers and compliance obligations. Many companies may opt to continue preparation for climate-related risk, emissions, or financial disclosures despite the current challenges to the Final Rules and the SEC stay. For more information on the Final Rules or the SEC’s stay of them, please contact any member of the firm’s public company or sustainability and ESG advisory practices.
[1] The Enhancement and Standardization of Climate-Related Disclosure for Investors, 89 Fed. Reg. 21,688 (Mar. 28, 2024).
