SEC's Climate Reporting Freeze Is No Time for Corporate Inaction

While the Securities and Exchange Commission’s climate reporting rules are on hold, registrants may want to make pragmatic preparations for compliance in light of the continuing uncertainty, so they’re not caught completely flat-footed if the rule survives a judicial challenge.

Multiple states, trade groups, and industry members are challenging in court the SEC’s climate reporting rules for public companies. These groups had asked the US Court of Appeals for the Eighth Circuit, which is hearing these consolidated cases, to issue a stay—essentially stopping the rule from going into effect amid the dispute.

Rather than wait for the court to rule on the request, the SEC on April 4 put the rule on hold itself until the cases before the Eight Circuit are completed. But the commission is by no means backing down from defending its rule.

The SEC’s order states that it still believes the rule is consistent with law and its long-standing authority, and “will continue vigorously defending the Final Rules’ validity in court.” The commission nonetheless determined that “justice so requires” the stay to “facilitate the orderly judicial resolution” of the case and avoid “potential regulatory uncertainty.”

There is still an open question how long this stay will last. The SEC has asked the court not to decide on the requests for a stay of the rule. The court hasn’t yet responded.

Because there isn’t yet a schedule for the challenge, it’s hard to predict whether the court will have reached a final ruling—or if parties will appeal that ruling—before the compliance dates for initial reporting would have come into effect. For example, large accelerated filers would have initial reports due by 2026 for fiscal year 2025 information.

Groups and states seeking to defend the rule or make it more stringent may seek to overturn the SEC’s stay in court. If the rule is ultimately upheld, in whole or in part, and the compliance dates aren’t adjusted following the adjudication process, registrants could find themselves in a time crunch if the SEC immediately lifts the stay at the conclusion of the case.

Many registrants have recognized the significant lead time needed to prepare for and implement the rule’s requirements. For instance, a company should still consider what processes it may need to kick off to identify and secure attestation providers or enhance internal disclosure controls and procedures for climate information and related work.

While it may be imprudent to begin this work in earnest while the rule is in flux, initial preparations may be warranted. Companies also should consider the extent they may have to do similar work for other reporting measures—such as the EU’s Corporate Sustainability Reporting Directive or California’s climate disclosure laws.

These may be required directly by those regulators, or indirectly from key customers who need supply chain information to meet their own reporting obligations.

The case is Liberty Energy, Inc. v. SEC, 8th Cir., No. 24-01624.

This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law and Bloomberg Tax, or its owners.

Author Information

Jon Solorzano and Corinne Snow are counsel, environmental, social, and governance, at Vinson & Elkins.

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