The Securities Exchange Commission’s new rules on climate change disclosure have hit a roadblock as a federal court temporarily halted the implementation of the regulations on Friday. The rules, which require public companies to disclose more about the business risks they face from climate change, have been criticized by oil and gas companies as costly and arbitrary.
The court’s decision to halt the rules came after two oil and gas companies, Liberty Energy and Nomad Proppant Services, filed a petition challenging the regulations. They argued that the rules were unconstitutional and violated the First Amendment by mandating discussions about climate change. The companies also claimed that the rules would impose irreparable compliance costs on businesses.
Industry groups, political allies, and ten Republican-led states have also filed lawsuits to stop the regulations, with the U.S. Chamber of Commerce calling the rules unconstitutional. The rules, approved by the S.E.C. earlier this month, require some publicly traded companies to disclose their climate risks and greenhouse gas emissions.
Climate disasters, such as hurricanes, floods, and droughts, are increasingly impacting businesses and individuals worldwide. In 2023, the United States experienced a record number of weather and climate disasters that cost at least $1 billion each. Treasury Secretary Janet Yellen has warned that losses tied to climate change could have cascading effects on the financial system.
Environmental groups have also challenged the rules, arguing that the S.E.C. did not go far enough in protecting investors. Hana Vizcarra, an attorney at Earthjustice, criticized the S.E.C. for not requiring companies to fully disclose the climate risks they pose.
The S.E.C. had initially proposed that large companies disclose emissions not only from their own operations but also along their value chain. However, after objections from businesses, the S.E.C. removed that requirement and only required the biggest companies to report direct emissions that would impact their bottom lines.
Despite the court’s decision to temporarily halt the rules, the S.E.C. argued that the request was premature as companies would not be required to make climate disclosures until March 2026. The debate over climate change disclosure and its impact on businesses is likely to continue as stakeholders on all sides weigh in on the issue.
