Court pauses climate disclosure rules, prolonging regulatory uncertainty

CASPER (WNE) — The Securities and Exchange Commission spent years devising a framework for climate-specific disclosure rules aiming to give investors “decision-useful information” on a growing class of climate risks faced by publicly traded companies.

But only weeks after being released on March 6, the rules have already hit a roadblock.

The Fifth Circuit Court in New Orleans paused implementation of the climate disclosure rules on March 21 as it weighs a decision in a lawsuit brought by oil-field-services companies Liberty Energy and Nomad Proppant Services, marking a setback for environmentalists while prolonging a milieu of regulatory uncertainty.

The stay has been applauded by energy advocates in states like Wyoming, where leaders interpret the rules as an undue political effort certain to subdue the fossil fuel sector.

Trade group Western Energy Alliance has called the rules an attempt to “defund American oil and natural gas production.”

The trade group’s response is one of many backlashes, including a Wyoming-endorsed, 10-state legal petition filed against the SEC in the Eleventh Circuit which argues the move “exceeds the agency’s statutory authority and otherwise is arbitrary, capricious, an abuse of discretion, and not in accordance with law.”

The battle comes at a time when the majority of publicly traded companies are already disclosing an assortment of climate risks.

The rules “recognize that investors benefit… from bringing greater consistency, comparability… to such disclosures,” according to SEC Chair Gary Gensler, who says the rules come in response to investor pressure for more detailed, reliable and comparable information on these risks.

Under the rules, companies would be required to disclose expenses or losses incurred from severe weather events like hurricanes, tornadoes, flooding, drought and wildfires. They would also be obliged to disclose how climate-related targets and goals materially affect operations and financial conditions, through added expenses or regulatory compliance.

This story was published on March 21, 2024.