U.S. Appeals Court Pauses SEC Climate Disclosure Rules

The decision will put ESG reporting temporarily on hold.

March 19, 2024

A U.S. appeals court on Friday temporarily paused new rules issued by the Securities and Exchange Commission (SEC) requiring public companies to report climate-related risks.

The New Orleans-based 5th U.S. Circuit Court of Appeals granted a request from Liberty Energy Inc. and Nomad Proppant Services LLC to put the rules on hold.

First proposed in 2022, the rules aim to standardize climate-related company disclosures about greenhouse gas emissions, weather-related risks, and how companies are preparing for the transition to a low-carbon economy.

According to Reuters, the companies involved in the case said in court filings that the rules would force companies to collectively spend over $4 billion in compliance costs and could open companies up to increased litigation. They argued the rules go beyond the SEC's authority under U.S. securities law, and that they are a "thinly veiled attempt" to inject the SEC into climate policy by requiring disclosure of a "breathtaking volume of information" about greenhouse gas emissions and other climate concerns.

At least 25 Republican-led states including West Virginia, Texas, and Ohio, and major business groups like the U.S. Chamber of Commerce have challenged the rules in court, including in the 5th, 6th, 8th, and 11th U.S. Circuit Courts of Appeals.

In June 2022, NACS submitted comments to the SEC about the proposal. “The industry takes seriously its role in reducing carbon emissions and recognizes that structure and consistency in reporting are helpful goals,” said NACS in the letter. “In our view, however, the proposal exceeds the SEC’s statutory authority, conflicts with its mission, creates unwieldy economic burdens even on businesses entirely outside of its jurisdiction, and sets a precedent that would take securities regulation into a political sphere that would be harmful to the SEC and the future of regulation of the markets.”

Read more about the ruling in The Hill and The Wall Street Journal.