The U.S. Chamber of Commerce has filed a lawsuit against the Securities and Exchange Commission seeking to overturn the agency’s new climate disclosure rule.
The SEC’s final rule, which was approved March 6 in a 3-2 vote, erodes the reasonable investor standard of materiality and micromanages how companies make key determinations about materiality, which is why the U.S. Chamber and co-plaintiffs Texas Association of Business and Longview Chamber of Commerce filed the lawsuit March 14 in the 5th U.S. Circuit Court of Appeals in New Orleans
The rule will require public companies to disclose a host of climate-related information in their periodic reports and registration statements. That information includes material climate-related risks; activities to mitigate or adapt to such risks; information about the company’s board of directors’ oversight of climate-related risks; and information on any climate-related targets or goals that are material to the company’s business, results of operations or financial condition, according to an SEC fact sheet and information outlined by SEC staff during the March 6 meeting.
The SEC is already facing multiple lawsuits challenging the rule from stakeholders on both sides of the debate.
“While we appreciate Chairman (Gary) Gensler’s constructive engagement with the business community and many of the modifications made by the SEC to the original proposed rule, the final rule makes substantively harmful changes to 50 years of corporate governance precedent that will have implications well beyond this single rule,” said Tom Quaadman, executive vice president of the Chamber's Center for Capital Markets Competitiveness, in a statement. “Consequently, we are compelled to seek redress in the courts over this flawed rule.”
The SEC did scale back the final rule in several aspects when compared with the March 2022 proposal on which it was based, most notably when it comes to greenhouse gas emission disclosures.
Under the proposal, public companies were required to disclose the greenhouse gas emissions they generate or purchase — Scope 1 and Scope 2 — and the indirect emissions generated from a company’s supply chain, if material — Scope 3 — though smaller companies would have been exempt from the final requirement.
The SEC removed the Scope 3 disclosure requirement in the final rule and made it so only large companies have to report Scope 1 and 2 emissions when those emissions are material.
But Quaadman said the rule overall will only create more confusion and undermine investor confidence in the public company system.
“Stopping this government micromanagement of business is the same reason why we successfully sued the SEC over its stock buybacks rule in 2023,” Quaadman said. “The U.S. Chamber supports a framework for disclosure of material climate risks and emissions. The best path forward is for the SEC to propose a new rule.”
When asked for comment, an SEC spokesperson provided the same response the agency gave earlier in the week when the Sierra Club challenged the rule. The commission, the spokesperson said in an email, “Undertakes rule-making consistent with its authorities and laws governing the administrative process and will vigorously defend the final climate risk disclosure rules in court.”
