Court temporarily stops SEC’s new climate rules

A federal court on Friday temporarily halted new Securities Exchange Commission rules requiring publicly traded companies to make more disclosures about the business risks they face from climate change. They sided with two oil and gas companies who criticized the requirements as costly and arbitrary.

Approved by the SEC this month, the rules require some publicly traded companies to disclose their climate risks, and how much greenhouse gas emissions they produce. Industry groups and their political allies have filed numerous lawsuits challenging the regulations.

The U.S. Chamber of Commerce, which represents a broad cross-section of industries, filed suit this week in the U.S. Court of Appeals for the Fifth Circuit seeking to halt the rules, calling them unconstitutional. Ten Republican-led states have also filed suit to block the rules.

The emergency reprieve granted Friday by Fifth Circuit judges came in a case brought by two fracking companies, Liberty Energy and Nomad Proppant Services. “There is no clear authority for the SEC to effectively regulate the controversial issue of climate change,” the two companies wrote in their petition. They were “arbitrary and capricious,” the two companies said, and violated the First Amendment, which protects free speech, by “effectively mandating discussions about climate change.”

Moreover, the rules would cost companies “irreparable harm in the form of irreparable compliance costs,” they said.

Climate disasters, including extreme weather events such as hurricanes, floods and droughts, are taking an increasing toll on both people and businesses around the world. In 2023, the United States experienced a record 28 weather and climate disasters, each costing at least $1 billion. This was reported by the National Oceanic and Atmospheric Administration. Treasury Secretary Janet Yellen said last year that losses could arise from climate change “cascade through the financial system.”

Environmental groups have also challenged the rules, saying the SEC has not gone far enough in protecting investors.

“As climate impacts like wildfires, floods and drought disrupt every facet of the U.S. economy, the SEC has chosen to bury its head in the sand rather than require companies to demonstrate the full climate risks they pose,” says Hana Vizcarra, an attorney at Earthjustice, which along with the Sierra Club and other environmental groups also sued the SEC

The SEC had initially proposed that large companies would be required to disclose planet-warming emissions not only from their own operations, but also from the emissions produced in a company’s so-called “value chain” – a term that encompasses everything everything from the parts or services purchased from other suppliers to how people who use the products ultimately dispose of them.

But after objections from companies, the SEC dropped that requirement and, under the final rules, only required the largest companies to report their direct emissions, and only if they determined the emissions would impact their bottom line. These rules gave companies a lot of leeway and exempted thousands of smaller companies. But some companies, including the fracking companies that won the court’s stay, still believed they went too far.

The Fifth Circuit granted the emergency stay over objections from the SEC, which had argued that the request was premature. Companies would not be required to provide climate information before March 2026.