This week the Acting Chairman of the SEC, the US financial market regulator, published (click here) a statement regarding the SEC’s climate disclosure rules.
What is it about?
- In March 2024 the SEC passed The Enhancement and Standardization of Climate-Related Disclosures, an extensive set of climate disclosure rules. A wave of court challenges ensued despite the final rule comprising a substantially watered-down regime after the SEC jettisoned several more invasive proposals including the reporting of Scope 3 emissions. This pushback resulted in the SEC opting for a voluntary stay of the rules in April 2024;
- At the time the final rule was passed, then Commissioner Uyeda, who voted against the rule, issued this dissenting statement citing concerns over the SEC’s statutory authority to introduce such far reaching and impactful requirements. These same sentiments are echoed in this week’s statement where now Acting Chairman Uyeda announced that he had directed SEC staff to “notify the Court of the changed circumstances” and asking for the Court not to schedule arguments for the case in order to give the SEC time to deliberate and agree next steps;
- The Acting Chairman stated that the new rules do not align to his “views” and cited the recent change in the composition of the Commission following the new US administration’s entry to the White House and the departure of Gary Gensler, the former Chairman who was a key proponent of the new rules. He also cited the recent Presidential Memorandum (click here) regarding a “Regulatory Freeze”.
Despite the relatively benign nature of the Acting Chairman’s announcement, it elicited this response from Democrat-aligned Commissioner Caroline A. Crenshaw. In her statement, the Commissioner noted that Chairman Uyeda’s announcement was made without the input of the full Commission. While she agrees with the Acing Chairman’s position that Federal agencies must act within the boundaries of their constitutional and statutory authority, she challenges the notion that in setting the new rules, the SEC had acted outside of its remit.
The future of the SEC’s enhanced climate disclosure rules are far from assured. It remains to be seen whether they will be cancelled altogether or if a compromise position might be found. With the new White House administration’s general negative posture toward ESG and climate regulation, it seems improbable that the new rules will see the light of day. Despite this, firms should consider whether any in-flight programmes related to the new rules should be mothballed for the time being or slow-pedalled pending confirmation of the SEC’s pathway ahead.