The SEC Proposes to Revoke Climate Risk Disclosure Rule

The Securities and Exchange Commission (SEC) proposed on Friday to eliminate a rule put in place during the Biden administration that mandated public companies disclose potential climate-related risks.

SEC Chairman Paul Atkins emphasized that the agency’s disclosure requirements should align with its statutory authority, adhering to the principle of materiality. He noted that the focus should be on when the benefits justify the associated costs and burdens.

Starting in 2024, the SEC is set to require nearly all publicly listed companies to provide detailed information on various climate-related issues, which include greenhouse gas emissions, risk management related to climate, and the financial implications of extreme weather events. However, the SEC argues that the previous administration’s rule overstepped its statutory boundaries and seeks to halt such disclosures.

• The SEC stated these disclosures are unnecessary and do not align with a materiality-based approach that serves the interests of both registrants and investors.
• They also noted that these requirements exceed the policy concerns inherent in federal securities law.
• The obligations would impose substantial costs on public companies and their shareholders, which are not counterbalanced by the informational advantages for some investors.
• The disclosures do not align with the European Commission’s goals of fostering capital formation and enhancing the status of public companies.

A 60-day comment period will follow regarding this proposed action.

Amazon has expressed that fulfilling the disclosure proposals would be “extremely challenging, if not unfeasible” in 2023.

During a hearing in 2023, Rep. Ashley Hinson (R-Iowa) questioned SEC Chairman Gary Gensler, suggesting that current law does not provide the SEC the authority to regulate greenhouse gas practices.

Kent Rathman, President of the Competitive Enterprise Institute, remarked that the SEC’s decision to rescind the climate change disclosure rule represents the most significant deregulatory move by the agency in over fifty years.