You might recall that the litigation over the SEC’s climate disclosure rules (see, e.g., this PubCo post) was not limited to those, like the Chamber of Commerce, Liberty Energy and the State of Iowa, challenging the SEC’s authority to adopt the rules, but also included some environmental groups—the Sierra Club and the Natural Resources Defense Council—which affirmed the SEC’s authority, but contended that, in rolling back the proposal, the SEC had “fallen short of its statutory mandate to protect investors.” In particular, they were disturbed by the removal in the final rules of requirements to disclose Scope 3 emissions. (See this PubCo post.) Now, both the NRDC and the Sierra Club have moved to voluntarily dismiss their petitions for review.
In its motion, the NRDC explained that it “and many of its members rely on information on public companies’ management of climate-related financial risks to properly invest their money. NRDC views the Final Rule as consistent with the SEC’s authority and mission and as a step forward from the status quo that will improve the consistency and comparability of disclosures of climate-related financial risk. This petition for review concerned the SEC’s decisions with respect to certain specific disclosures in the Final Rule. However, NRDC has decided to focus its resources on advocating for improvements to climate-related financial disclosures outside of this litigation.”
The Sierra Club expressed similar sentiments in its motion, adding that “the Sierra Club Petitioners believe the Final Rule makes needed improvements to disclosure requirements that will better inform them of the financial risks companies face from climate change and that are well within the SEC’s authority to require. However, we sought review of several discrete deficiencies in the rule. Although those deficiencies remain, the Sierra Club Petitioners now believe that focusing our resources on advocating for improved investor protections outside of court, while also supporting efforts to defend the SEC’s fundamental authority to require disclosure of climate-based risks, is the most effective way to ensure investors have the information they need to properly evaluate companies’ exposure to such risks and thus effectively manage their asset portfolios.”
The motions note that “[c]ounsel for the Securities and Exchange Commission and counsel for the State-Respondent Intervenors have consented to this voluntary dismissal.”
In a statement to Law 360, the Sierra Club said that the “‘SEC has full legal authority to require detailed climate risk disclosures to better protect investors, encourage more efficient markets, and facilitate capital formation….This rule is a vital step forward in that mission, even though the SEC did not exercise its full authority under the law.’” In addition, the article reports that the “group said it will continue to push the SEC to strengthen the required disclosures, saying financial risks stemming from the failure to prepare for the transition to a decarbonized economy ‘affect virtually every investor in U.S. public companies, and we will not stop advocating for stronger investor protections.’”
Even though the Sierra Club and NRDC are leaving the litigation, the authority of the SEC to adopt the final rules will not be without support. The attorneys general and other officials of various states— District of Columbia, State of Arizona, State of Colorado, State of Connecticut, State of Delaware, State of Hawaii, State of Illinois, State of Maryland, State of Massachusetts, State of Michigan, State of Minnesota, State of Nevada, State of New Mexico, State of New York, State of Oregon, State of Rhode Island, State of Vermont, State of Washington and State of Wisconsin—have all been added to the consolidated case as intervenors on behalf of the SEC. In their successful motion to intervene, they contended that these states “have a substantial interest in defending the Final Rule, which provides the States, their residents, and other investors with information about climate-related risks that is critical to making informed investment decisions.” (See this PubCo post.) Presumably, these states will not be challenging whether the SEC went far enough.
