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Lawsuits Prompt SEC to Halt Implementation of Climate Disclosure Rules

SEC Climate Disclosure Rule (Credits: Reuters)

Legal hurdles have forced the U.S. Securities and Exchange Commission (SEC) to pause on implementing climate disclosure requirements for companies. The decision comes as legal challenges against the regulations are pending in various circuit courts nationwide.

In a move that reflects the contentious nature of the issue, the SEC finalized a rule in March mandating publicly traded companies to disclose any climate-related risks to their business operations.

Additionally, the rule required certain midsize and large firms to disclose the CO2 emitted from their operations. This sparked a wave of opposition, with several Republican states, companies, and business groups filing lawsuits against the regulations and seeking to halt their enforcement.

U.S. Securities and Exchange Commission (Credits: Brittanica)

The legal challenges, filed in different circuit courts, including the Fifth Circuit, prompted the SEC to take action. The agency issued an administrative stay on the rule after two energy companies, Liberty Energy Inc. and Nomad Proppant Services LLC, sought relief from the Fifth Circuit court, which was granted on March 15.

Under the SEC rules, businesses must report on the potential impact of climate risks on their financial condition and disclose strategies employed to mitigate such risks. This includes divulging climate targets and detailing losses incurred due to severe weather events.

Facing mounting legal pressure, the SEC continued implementing its climate rule requirements while litigation proceeded. SEC Secretary Vanessa Countryman defended the decision, stating that it would facilitate an orderly judicial resolution of the challenges posed by the regulations.

Despite the stay, the SEC reiterated that the regulations are consistent with applicable law and within the commission’s authority. The agency remains committed to defending the validity of the rules in court.

Court Temporarily Halts S.E.C.’s New Climate Rules (Credits: Yahoo News)

Republican states, spearheaded by Iowa Attorney General Brenna Bird, hailed the SEC’s decision as a victory against what they deemed an “outrageous” climate mandate. Bird emphasized the importance of upholding the rule of law and protecting businesses from burdensome regulations.

The legal battle surrounding the SEC’s climate rules underscores the deep political divide on the issue. The rules, adopted along party lines with Democratic commissioners in favor and Republican commissioners against, have drawn criticism for their potential impact on businesses and investors.

As the litigation comes to light, the fate of the SEC’s climate disclosure requirements hangs in the balance, with stakeholders closely monitoring developments in the courts.

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