As we previewed, the U.S. Securities and Exchange Commission (“SEC”) has proposed to rescind its Climate-Related Disclosure Rules, which were adopted in March 2024 and require registrants to provide certain climate-related information in their registration statements and annual reports. The Climate-Related Disclosure Rules, however, have been stayed since April 4, 2024, pending litigation which we have widely covered on this blog. In today’s release, the SEC called the rules a “dramatic overreach of the Commission’s statutory authority and, independently, unsound as a matter of policy,” and proposed to rescind the Climate-Related Disclosure Rules in their entirety.
The proposing release explains the SEC’s view that the Climate-Related Disclosure Rules exceed the statutory limits of the SEC’s disclosure authority. The SEC argues that the Climate-Related Disclosure Rules compelled disclosures that are “not within the scope of the categories of disclosures Congress required and do not comport with the directives Congress set for excepting from, substituting, or adding to those disclosures.” The SEC also claims that the Climate-Related Disclosure Rules interfere with State corporate law without a statutory directive.
The SEC adds that even if it had the authority to adopt the Climate-Related Disclosure Rules, there are independent policy reasons supporting their withdrawal. The SEC notes that the rules are unnecessary and inconsistent with a registrant-specific, materiality-based approach to disclosure, which SEC Chair Paul Atkins has repeatedly advocated since the start of his tenure. In addition, the SEC claims that the Climate-Related Disclosure Rules are not aligned with federal securities law policy concerns, impose unjustified costs as compared to the informational benefits the disclosures may provide to certain investors, and conflict with the SEC’s policy objectives of facilitating capital formation and promoting public company status.
Chair Atkins noted that “SEC disclosure obligations should comply with the Commission’s statutory authority, be guided by materiality as the North Star, avoid the practical effect of dictating corporate behavior, and be imposed only when the expected benefits justify the likely costs and burdens.” The public comment period is now open until 60 days after publication of the proposing release in the Federal Register.
Read the SEC’s press release, fact sheet and proposing release.