US Court pauses SEC climate disclosure rules

March 20th, 2024

The Fifth Circuit US Court of Appeals has granted an administrative stay to temporarily halt the climate disclosures rules released by the Securities and Exchange Commission (SEC).

The ruling comes in response to a petition filed by oilfield services company Liberty Energy, which criticised the new requirements as going beyond the scope of the SEC’s jurisdiction, ESG Today reports.

The rules were finalised by the regulator last week to require registrants to disclose certain climate-related information, such as their greenhouse gas (GHG) emissions, in registration statements and annual reports.

Liberty Energy claimed in its petition that the requirements exceed the SEC’s authority and place increased costs on the energy industry without clear benefit.

Chris Wright, CEO of Liberty Energy, said: “We believe that the Climate Rule is arbitrary and capricious, as it requires public companies to spend significant resources to provide information in their SEC filings in response to climate change without reliable support of any clear resulting benefit.”

The administrative stay is the latest in a series of challenges to the new requirements, including a lawsuit from the attorneys general of 10 Republican-led states, including West Virginia and Georgia, Law 360 reported.

The SEC first proposed the requirements in 2022 and has faced criticism over the scope of the rules ever since, including Liberty Energy’s claim that the regulator aimed to “inject [itself] into the world of climate politics” in its petition.

The new requirements have also faced criticism from pro-ESG groups for “weakening” the reporting requirements. The Sierra Club and the Sierra Club Foundation, represented by Earthjustice, filed a lawsuit against the SEC for removing Scope 3 emissions disclosure requirements.

Scope 3 emissions include those generated by a company’s supply chain and customers and reporting on them was criticised by companies, including those in the oil and gas industry, as overly burdensome.

Dan Chu, Executive Director of the Sierra Club Foundation, said: “The SEC has a responsibility to the Sierra Club Foundation, as an investor, to ensure that we have the tools and information needed to fully assess the risks and opportunities within our portfolios.

“The new disclosure rules fall short of providing us with the complete and consistent information we need to assess the significant financial risk that climate poses to companies and investments.”

Last Updated: 21 March 2024