DEEP DIVE: U.S. SEC Argues Climate Disclosures Are Often 'Inconsistent' and 'Difficult to Compare'

The U.S. Securities and Exchange Commission (SEC) has defended its climate disclosure rules in court in the face of challenges from Republican states and business leaders.

The SEC delayed indefinitely its implementation of the final rule in April after several petitioners, including Liberty Energy Inc., Nomad Proppant Services LLC, the Texas Alliance of Energy Producers, and the Domestic Energy Producers Alliance, argued that the SEC was exceeding its mandate and placing an undue burden on businesses. These petitions were eventually consolidated in the Eighth Circuit Court of Appeals.

The climate rule, properly known as Enhancement and Standardization of Climate-Related Disclosures for Investors, requires public companies to disclose environmental data such as greenhouse gas emissions (GHG) and materiality assessments of climate-related risks to the organization. When the SEC began soliciting feedback on the proposed rule in March 2022, the draft text included extensive requirements for disclosing Scope 3 emissions, which are emissions from other organizations along the supply chain. These contentious elements were eventually omitted, making the final version a considerably watered-down proposal.