SEC to Pause Litigation Over Climate Disclosure Rules

In an unsurprising move, Acting SEC Chair Mark Uyeda has directed the SEC staff to ask the Eighth Circuit Court of Appeals, the court reviewing the SEC’s climate disclosure rules, to not schedule the case for argument in order to provide time for the SEC to determine next steps.

The rules, which were scheduled to become effective on May 28, 2024, mandate certain climate-related disclosures from SEC registrants, as we have described in detail here. In April 2024, the SEC voluntarily stayed the rules pending completion of the Eighth Circuit Court of Appeal’s review.

In his statement – which was criticized by Caroline Crenshaw, the sole Democratic Commissioner – Uyeda questioned the SEC’s statutory authority to adopt the rule and whether the SEC followed the proper procedures under the Administrative Procedure Act. Further, he said, the Commission has changed its composition (currently two Republicans against the rule versus one Democrat for) and the President has issued a memorandum instituting a regulatory freeze.

Meanwhile, climate disclosure legislation remains a possibility at the state level. In early February, the U.S. District Court for the Central District of California granted a partial motion to dismiss filed by the California Air Resources Board, dismissing claims that California's two climate disclosure laws (the Climate Corporate Data Accountability Act and the Climate-related Financial Risk Act, as described further here) violate the Supremacy Clause and limitations on extraterritorial regulation. However, the litigation still continues over the First Amendment claim, which has not been dismissed.

In New York, a state senator has introduced a bill into the state senate that would require certain business entities within the state to annually disclose scope 1, scope 2 and scope 3 green house gas emissions, similar to the disclosure required by the California legislation. The proposed Climate Corporate Data Accountability Act, Senate Bill S3456, would apply to entities doing business in New York and with total revenues of more than $1 billion in the preceding fiscal year, including but not limited to revenues received by all of the business entity's subsidiaries that do business in the state of New York.