SEC Defends its Climate Disclosure Rule in Court

The U.S. Securities and Exchange Commission launched a defense in court of its new climate reporting rule, arguing that the proposed disclosures in the rule provide “information directly relevant to the value of investments,” and that it is within the Commission’s authority to mandate climate risk disclosures. In a brief filed this week with the U.S. Eighth Circuit Court of Appeals, the Commission reiterated its view that “climate-related risks—and a public company’s response to those risks—can significantly affect a company’s financial performance and position,” yet current reporting on these risks are “inconsistent,” and “difficult to compare,” impeding the ability of investors to make decisions. The SEC announced the release and adoption of the new rules in early March, 2 years following the Commission’s initial draft release, establishing for the first time requirements for public companies in the U.S. to provide disclosure on climate risks facing their businesses, plans to address those risks, the financial impact of severe weather events, and, in some cases, greenhouse gas emissions originating from their operations.

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