Nine states file legal challenge to SEC climate disclosure rule

West Virginia Attorney General Patrick Morrissey announced that a coalition of nine states will file a legal challenge to new regulations requiring public companies to disclose climate-related risks and direct greenhouse gas emissions.

The Securities and Exchange Commission (SEC) on Wednesday approved climate change disclosure rules that go into effect in 2026 by a 3-2 vote. Fierce opposition from the business community delayed passage of the final rule as the agency reviewed thousands of comment letters. Following the original proposal in 2022.

Morrissey said he co-led the petition for review filed by West Virginia and Georgia with the U.S. Court of Appeals for the 11th Circuit, along with Alabama, Alaska, Indiana, Oklahoma, South Carolina, Wyoming, Virginia also participated.

“This is a covert operation to undermine the energy industry,” Morrissey said. He later added: “This is another attempt to advance an agenda without legal authority, and I will not tolerate that.”

The new rules immediately sparked a backlash from business groups and Republicans who had long opposed the changes. The final rule repeals provisions requiring companies to report emissions from their supply chains and products, but could face additional legal challenges.

In addition to challenging the SEC’s legal authority to pursue this rule, Morrissey also said that “this rule appears to have some serious First Amendment problems.”

“We are concerned about forced speech, which creates a framework for federal agencies to force companies to engage in initiatives and disclose information that they otherwise would not want to do,” Morrissey said. Ta.

Tom Quadman, executive vice president of the U.S. Chamber of Commerce’s Capital Markets Competitiveness Center, said the corporate lobbying giant is “carefully reviewing the details of the rule and its legal basis to fully understand its impact.” said.

“Although some of the most onerous provisions of the original proposed rule appear to have been removed, this is still a novel and complex rule that could have significant implications for companies and their investors. The Chamber will continue to use all tools at its disposal, including litigation when necessary, to prevent government overreach and maintain a competitive capital markets system,” Quadman said. .

Tim Scott, R.S.C., ranking member of the Senate Banking Committee, also spoke about the Congressional Review Act, a law that allows Congress to consider and potentially overturn new federal regulations through joint resolutions. has vowed to fight this rule.

“Ignoring the concerns of Americans, small business owners, and stakeholders across the country, Chairman Gensler is outside the scope of his agency’s authority and would rather support the policies of the Biden administration than support SEC policy.” “We pushed through a final rule that does far more to advance far-left climate policy than it does to protect investors, maintain fair, orderly, and efficient markets, and promote capital formation,” Scott said. said.

House Financial Services Committee Chairman Patrick McHenry, RN.C., decries the “incalculable consequences” of “such disastrous regulation” and holds an on-site hearing on March 18. Then he announced.

“At a time when fewer companies are entering the public markets than at any time in recent memory, we need to make it easier for companies to go public and stay listed. Instead, Chairman Gensler has overstepped his statutory authority and , piling up massive new compliance costs that are devastating to investors and job creators alike. Our capital markets are now the envy of the world,” McHenry said.

Gensler said the updated rules will “benefit investors and issuers alike” and standardize reporting that many companies already do. Of the top 1,000 stocks in the Russell Index, about 90% already disclose some form of climate change information, and nearly 60% disclose information about emissions.

But opponents say it would prevent private companies from going public, require significant financial investment in disclosure controls, increase costs for consumers and undermine U.S. business competitiveness.

Two Republican committee members blasted the rule as an inappropriate move to force companies to adopt progressive climate change policies, and Republican committee member Mark Ueda called it “a sign of the commission’s seal.” “Climate regulations promulgated in the

Sen. Kevin Cramer (D), a member of the Banking Committee, called the rule “the definition of federal overreach.”

“Congress has not given the SEC any authority for this task, and the commission is not an environmental regulator,” Cramer said.

“Not only is this beyond the legal scope, but forcing publicly traded companies to report emissions data provides a competitive advantage to dirtier foreign producers who do not have such onerous requirements.” and at the same time incur a new debt.”

Mr. Gensler’s SEC has not shied away from conflicts with big companies, on everything from climate change disclosures to cryptocurrencies.

Big companies won’t hesitate to fight back.

“I’ve never seen an environment where so many different groups and individual companies are likely to sue the SEC. I’ve never seen an environment like this,” he said since 2013 Milken Institute Executive Vice President for Finance Michael Piwawar, who served as a Republican SEC commissioner until 2018, told The Hill.

Updated at 2:34 p.m.