In the latest Weekly Wright Report:
After Numerous Challenges, SEC Orders a Stay of its Climate Related Reporting Requirements
On March 6, 2024, the Securities and Exchange Commission issued new rules that require publicly traded companies to provide certain climate-related information in their registration statements and annual reports (“Final Rules”). The Final Rules were known as the Enhancement and Standardization of Climate-Related Disclosures for Investors. 89 Fed. Reg. 21,668 (Mar. 28, 2024). The Final Rules require information about a registrant’s climate-related risks that have materially impacted, or are reasonably likely to have a material impact on, its business strategy, results of operations, or financial condition. In addition, under the Final Rules, certain disclosures related to severe weather events and other natural conditions are required in a registrant’s audited financial statements. The Final Rules were due to become effective on May 28, 2024.
However, in response to the issuance of the Final Rules, between March 6 and March 14, 2024, numerous challenges to the Final Rules were filed in multiple courts by several groups of state Attorneys General, the U.S. Chamber of Commerce, energy companies, energy trade associations, and other climate advocacy groups. See Nat. Res. Def. Council, Inc. v. SEC, No. 24-707 (2d Cir. filed Mar. 12, 2024); Liberty Energy Inc. v. SEC, No. 24-60109 (5th Cir. filed Mar. 6, 2024); Louisiana v. SEC, No. 24-60109 (5th Cir. filed Mar. 7, 2024); Tex. All. of Energy Producers v. SEC, No. 24-60109 (5th Cir. filed Mar. 11, 2024); Chamber of Commerce of U.S. of Am. v. SEC, No. 24-60109 (5th Cir. filed Mar. 14, 2024); Ohio Bureau of Workers’ Comp. v. SEC, No. 24-3220 (6th Cir. filed Mar. 13, 2024); Iowa v. SEC, No. 24-1522 (8th Cir. filed Mar. 12, 2024); West Virginia v. SEC, No. 24-10679 (11th Cir. filed Mar. 6, 2024); Sierra Club v. SEC, No. 24-1067 (D.C. Cir. filed Mar. 13, 2024). On March 15, 2024, the Fifth Circuit issued an administrative stay of the Final Rules.
Subsequently, on March 19, 2024, all of the various cases were consolidated for review in the U.S. Court of Appeals for the Eighth Circuit. After the consolidation, several parties filed motions to continue the stay of the implementation and enforcement of the Final Rules. In response to the pending legal challenges, on April 4, 2024, the SEC decided to voluntarily exercise its discretion to stay its own Final Rules pending the completion of judicial review. The SEC stated that its stay will facilitate the orderly judicial resolution of the pending legal challenges and allow the court of appeals to focus on deciding the merits. Further, a stay avoids potential regulatory uncertainty if registrants were to become subject to the Final Rules’ requirements during the pendency of the challenges to their validity. Accordingly, as of April 4, 2024, the Final Rules are stayed and no further compliance is required. It is not known how long the court cases will take to be resolved at this time.
If you have any questions regarding this subject, please contact any member of the WCS Government Contracts Practice Group.