The Securities and Exchange Commission (SEC) voted to end its defense of its rules requiring disclosure of climate-related risks and greenhouse gas emissions, which have been subject to multiple litigation efforts in federal court.
In March 2024, the SEC adopted rules requiring companies to adhere to a special disclosure regime regarding climate risks posed by their operations.
States and private entities have challenged the rules in court. Litigation efforts have been consolidated in the Eighth Circuit Court of Appeals, and the commission stayed the rules’ effectiveness pending the outcome.
“The goal of today’s commission action and notification to the court is to cease the commission’s involvement in the defense of the costly and unnecessarily intrusive climate change disclosure rules,” SEC Acting Chairman Mark Uyeda said in a statement.
After voting to end its support of the climate rules, SEC staff submitted a letter informing the court of its decision and stating that its legal defense team no longer will be authorized to advance the arguments in the brief the SEC filed prior to the change in presidential administration. The letter further stated the commission yields any oral argument time back to the court.
The SEC’s decision follows similar announcements by the Federal Reserve and Office of the Comptroller of the Currency, which pulled out of international agreements meant to address climate risks.
Financial services trade organizations, such as the Independent Community Bankers of America (ICBA), applauded the SEC following its announcement.
“As ICBA has repeatedly said, community banks are committed to ensuring their local communities and environments flourish, but the rule’s unprecedented costs and potential liabilities threatened to limit the ability of community banks to raise capital to support lending in their communities and to further discourage the formation of new community banks,” ICBA President and CEO Rebeca Romero Rainey said in a statement. “Further, the rule provided no meaningful exemption for community banks, which would have subjected many community banks to some of the most onerous provisions of the final rule irrespective of their small asset size.”
On the flip side, various environmental protection organizations, such as the Sierra Club and the Natural Resources Defense Council, previously contended the SEC’s rules did not go far enough and challenged the exclusion of certain categories of SEC filers.