The US Securities and Exchange Commission (SEC) has staunchly defended its newly introduced climate reporting regulations, which have prompted a wave of legal challenges.
These pioneering rules, unveiled in early March, require U.S. public companies to disclose climate risks affecting their operations, strategies for risk mitigation, financial consequences of extreme weather events, and greenhouse gas (GHG) emissions.
In a recent brief to the U.S. Eighth Circuit Court of Appeals, the SEC emphasised the need for “more detailed, consistent, and comparable information” regarding climate risks. This push for enhanced disclosures responds to significant investor demand for improved data to support investment and voting decisions. The Commission has cited current reporting standards as inconsistent and difficult for investors to use effectively.
Opposition has come from various quarters, including 25 Republican state attorneys general and the U.S. Chamber of Commerce, who argue that the rules are overly burdensome and speculative, particularly concerning GHG emissions data. Despite these challenges, the SEC has paused implementation to address legal petitions but remains committed to enforcing the rules. “We continue to vigorously defend the new disclosure requirements,” the Commission asserted.
The SEC also addressed concerns about compliance costs, noting that the rules were revised from their original 2022 proposal to lower expenses and enhance investor utility. The Commission clarified that its role is not to regulate climate change itself but to ensure investor protection, in line with Congress’s mandate to require crucial investor information.
“This case is not about climate change or environmental policy; it is about protecting investors,” the SEC stated in its brief, framing the climate disclosure rule as a vital instrument for transparent financial reporting rather than as an environmental regulation.
