SEC votes to require company climate disclosures with scaled-back rule

The US securities regulator has enacted a rule that for the first time will require company disclosures on climate risks, even as the measure lacks some bolder mandates included in an initial proposal two years ago.

The Securities and Exchange Commission’s long-awaited, contentious rule is a pillar of chair Gary Gensler’s agenda. While the SEC has previously issued guidance on disclosure related to climate change, the new measure approved on Wednesday marks the first time the agency has crafted a rule specifically dedicated to it.

“Far more investors are making investment decisions that are informed by climate risk, and far more companies are making disclosures about climate risk” since the last guidance was issued in 2010, Gensler said before he and his fellow SEC commissioners voted 3-2 to pass the rule in Washington.

The final rule could require thousands of companies to report some greenhouse gas emissions in an attempt to provide investors with more consistent, reliable and comparable climate disclosures.

However, the extent of disclosures required will be less ambitious than first floated, possibly in an attempt, experts said, to insulate the rule from legal challenges.

Mere hours after adopting the rule, Patrick Morrisey, West Virginia’s attorney-general, announced he was joining a coalition of 10 states, including Georgia and South Carolina, on Wednesday to challenge the rule in the US Court of Appeals for the 11th circuit.

Although the SEC had modified the rule, it “is still wildly in defect and illegal and unconstitutional”, Morrisey said. He argued the regulator had reached beyond the authority it was granted by Congress. The rule may also violate the first amendment by forcing businesses “to put forth initiatives and disclose information that [they] might not otherwise want to do”, he said.

The SEC did not immediately respond to a request for comment on the lawsuit.

The regulator in March 2022 proposed that public companies’ annual…