Weather You're Ready or Not, the Long Awaited SEC Climate Disclosure Rules Are Coming
The SEC's five commissioners on March 6, 2024, will vote on whether to adopt long-awaited public company climate disclosure rules that would require registrants to report climate-related risks and metrics. In a Feb. 28, 2024, Sunshine Act Notice (in which the agency provides information about upcoming open-to-the-public meetings), the Commission confirmed it will "consider whether to adopt rules to require registrants to provide certain climate-related information in their registration statements and annual reports." During the meeting, the Commission also will consider whether to adopt amendments to Regulation NMS relating to national market system stock order execution disclosure requirements.
In an administration known for its frenzied pace of rulemaking, the Commission's proposed climate disclosure rules have long stood apart from the rest for the sweeping changes they would usher in, along with the expense companies will bear in order to design, deploy and utilize systems to track relevant data and prepare newly required disclosures. Such disclosures would cover a number of topics, including oversight and management of climate-related risks, identification and management of such risks, the impact of those risks on the business and data relating to a company's greenhouse gas emissions.
Since first proposing the rules in March 2022, the Commission has received more than 16,000 comments on the new climate disclosure requirements – the most comments in the SEC's history. Though the upcoming vote was long tabled and the proposed rule is expected to tone down certain aspects seen as subject to credible litigation risk (we're looking at you, Scope 3), many anticipate that a final rule, if adopted, will be subject to legal challenge under a variety of theories including the Major Questions Doctrine. Nevertheless, with pressure mounting to bring the rules to a vote this election year, it is likely that a final rule will be adopted on March 6, 2024, as a majority of the commissioners contend that standardized disclosure will provide stockholders and stakeholders increased clarity, consistency and comparability across companies and industries with regard to how climate risks are impacting the businesses in which they invest.
Members of the public can watch the open meeting, scheduled for 9:45 a.m. ET March 6, 2024, via the Commission's website. We expect a final rule to be adopted during the meeting, presumably in a 3-2 vote with Commissioners Hester Peirce and Mark Uyeda dissenting, as they have previously been clear about their concerns with the proposed rule.
We here at SECond Opinions will update you on the SEC's meeting, vote and the final rule, if adopted. If you need additional information on this topic – or anything related to securities enforcement or investigation – please contact the authors or another member of Holland & Knight Securities Enforcement Defense Team.