Yesterday, Acting SEC Chair Mark Uyeda issued a statement advising that he is requesting that the Court presiding over the SEC’s climate disclosure rule litigation not “schedule the case for argument” in order to allow time for the SEC to rethink its position. As you may know, a number of challenges to the climate disclosure rule were consolidated as State of Iowa v. SEC in the Eighth Circuit, where briefs in the case have been filed. However, for reasons explained in the Statement, Uyeda believes that the “rule is deeply flawed and could inflict significant harm on the capital markets and our economy.” As such, he said, the positions taken in the SEC’s briefs defending the SEC’s adoption of the rule are not reflective of his views. He believes that these views, particularly his concern that the SEC had no authority to adopt the rule, together with “the recent change in the composition of the Commission, and the recent Presidential Memorandum regarding a Regulatory Freeze, bear on the conduct of this litigation.” As a result, he maintains that “the Court and the parties should be notified of these changes.” Accordingly, he has directed the SEC staff to “notify the Court of the changed circumstances and request that the Court not schedule the case for argument to provide time for the Commission to deliberate and determine the appropriate next steps in these cases. The Commission will promptly notify the Court of its determination about its positions in the litigation.” Commissioner Caroline Crenshaw voiced her dissent, contending that what has really changed here has been “politics and not substance.” Does Uyeda’s move sound the death knell for the SEC’s climate disclosure rule?
As soon as the SEC adopted final rules “to enhance and standardize climate-related disclosures by public companies and in public offerings” in March 2024 (see this PubCo post, this PubCo post, this PubCo post, and this PubCo post), there was a deluge of litigation—even though, in the final rules, the SEC scaled back significantly on the proposal, putting the kibosh on the controversial mandate for Scope 3 GHG emissions reporting and requiring disclosure of Scope 1 and/or Scope 2 GHG emissions on a phased-in basis only by accelerated and large accelerated filers and only when those emissions are material. Those cases were then consolidated in the Eighth Circuit (see this PubCo post) and, in April, the SEC determined to exercise its discretion to stay the final climate disclosure rules “pending the completion of judicial review of the consolidated Eighth Circuit petitions.” (See this PubCo post.) There are currently nine consolidated cases—with two of the original petitioners, the Sierra Club and the Natural Resources Defense Council, having voluntarily exited the litigation (see this PubCo post), and the National Center for Public Policy Research having filed a petition to join the litigation more recently. (See this PubCo post). (In his statement, Uyeda notes that a separate case, Liberty Energy Inc. v. SEC, has also been filed in the Northern District of Texas. That case challenges the climate disclosure rules, “in an abundance of caution,” in the event that “a district court is determined to have jurisdiction over some or all of the challenges to the Rule.”)
Both Uyeda and Commissioner Hester Peirce—a majority of the current SEC commissioners—voted against adoption of the rule. At the time, Uyeda observes, Peirce contended that the “then-existing disclosure rules were sufficient and that the ‘[R]ule’s anticipated benefits do not outweigh the costs.’” She maintained that a Congressional mandate was necessary to adopt rules requiring “‘disclosure of information not clearly related to financial returns.’” In addition, Uyeda notes that many comments submitted regarding the rule argued that the rule should not be adopted because it “would require a large volume of financially immaterial information, financially material climate-related risks were already subject to disclosure under existing rules, and the proposed rules overstepped the SEC’s regulatory authority.”
Uyeda had argued against adoption because of his view that the SEC had neither “‘statutory authority [n]or expertise’ to address climate change issues and that ‘this [R]ule is climate regulation promulgated under the Commission’s seal.’” In this Statement, Uyeda continues to question the need for the rule, the evaluation of costs and benefits and whether proper procedure under the APA was followed. In particular, however, he focuses on the “lack of statutory authority”—a “weighty factor”—contending that “Commissioners have a constitutional obligation to determine the bounds of the agency’s statutory authority,” and asserting that his views on the authority of the SEC in this context “were the result of lengthy study and research informed by many comments on all sides of the issue.” As a result, he determined to ask the Court for a delay to allow the SEC to reconsider and determine next steps.
Crenshaw responded in this Statement, highlighting in particular that Uyeda acted “without the input of the full Commission.” None of the various “political developments” identified by Uyeda as changes that “bear on the conduct of this litigation,” she asserted, “goes to the merits of the Commission’s appeal, which was fully briefed months ago. If, as it appears to be, the acting Chairman’s true intent is to constructively deauthorize the Commission’s pursuit of the appeal to align with his policy preferences, then his statement is an end-run around Commission authority.”
Given that Uyeda quoted only from his and Peirce’s remarks on the rule, she added for the record some of her own, including that investors have long “been calling for ‘consistent, comparable, and reliable climate risk disclosures,’” and that she believes that the SEC “‘has clear authority under the Securities Act and the Exchange Act to require disclosures that are in the public interest…. This well-established authority has been consistently relied upon, and affirmed and reaffirmed across dozens of disclosure rulemakings over multiple decades.’ Under this deep-rooted framework ‘[o]ur disclosures cannot remain stagnant; we must provide investors the information they need to understand the risks associated with their public company investments in today’s world. A different outcome would harm the markets and investors.’” To the criticism that the SEC is “‘not an environmental agency and that we should not be in the business of supporting green agendas or setting pollution standards,’” she agreed that “‘[t]hose statements are true. But, we are in the business of requiring public company disclosure about risk. We have done it myriad times without having our authority questioned.’”
While she agreed “wholeheartedly” that the SEC “must act within the boundaries of constitutional and statutory authority,” she “dispute[d] with equal vigor the notion that the agency acted outside of its remit. It did not. The only things that have changed since the Rule was passed have been matters of politics and not substance. As such, I disagree with the position unilaterally taken today by the acting Chairman.”
A letter from the staff has been submitted to the Court consistent with the Acting Chair’s directives. It indicates that the SEC “will submit a status report to the Court no later than 45 days from the date of this letter. The Commission respectfully requests that the Court not take any action to schedule oral argument before this status report.”
