USA SEC & ESG Reporting

The United States Security & Exchange Commission (SEC), which oversees the enforcement of fair market practices to prevent manipulation and protect investors, has interrupted its progress toward climate disclosure rules, citing legal challenges to the new obligations.

Within the United States, some states, notably, California, have established their own climate disclosure regulations, which are also being challenged in the courts. The European Union as well, has developed disclosure requirements to increase transparency for investors and consumers.

In early March of this year, the SEC released and adopted these standards after two years, the first of their kind to require public companies in the US to disclose their climate risks (and plans to mitigate them), as well as the financial impact of risks such as severe weather events and even, in some cases, the greenhouse gas emissions caused by their activities.

However, even prior to the final release of these rules, they faced backlash from twenty-five Republican state attorneys general (AGs) and energy services companies, among others, requesting a stay pending review (which was granted by the court) and a lawsuit. These arguments stem from the notion that the requirements are too burdensome and costly for companies, that some of the data points cannot be sufficiently reliable, and, furthermore, that the rules fundamentally overstep the SEC’s authority. The SEC, for its part, argues that the new requirements are “consistent with applicable law and within the Commission’s long-standing authority.”