Dive Brief:
- The Securities and Exchange Commission has asked the Eighth Circuit Court of Appeals — where challenges to its climate-risk disclosure rule are consolidated — to proceed with litigation and issue a decision on the petitions against the rule. The agency withdrew its legal defense of the rule earlier this year.
- The SEC’s request was included in a status report submitted Wednesday in response to an Eighth Circuit April court order. The agency also said that it “does not intend to review or reconsider the rules at this time.”
- However, the agency declined to explicitly answer the court’s prompt on whether it will uphold and enforce the climate rule if legal challenges against it fail. “Nothing about the potential for future Commission action poses an impediment to a decision by this Court,” the SEC wrote in the July 23 report.
Dive Insight:
The fate of the SEC’s climate-risk disclosure regulation hangs in the balance as the agency, now operating under President Donald Trump, looks to distance itself from rulemaking established by his predecessor’s administration.
The SEC announced in March it would no longer defend its rule requiring companies to disclose certain climate-related risks in court because its lawyers were “no longer authorized to advance” arguments the agency had made to defend the rule under the Biden administration.
Shortly after, the Eighth Circuit issued an order pausing the litigation on the validity of the SEC’s climate disclosure rule until the SEC informed the court of its intention to review or reconsider the rule. The appeals court issued the April 24 order in response to a motion filed by a coalition of Democrat-led states, who initially signed on as intervenors alongside the SEC but now stand alone in defending the rule in court. The Eighth Circuit directed the SEC to file a status report to inform the court of its plans for the rule in that same order.
While the SEC said it does not intend to review or reconsider the rule, the agency did not explicitly answer the court’s prompt on whether it will adhere to the rule if the petitions from its challengers fail. Instead, the agency asked the court to end the pause in litigation, continue consideration of the parties’ arguments and “exercise its jurisdiction to decide the case.”
“If the Court were to uphold the Rules in whole or in part, any reconsideration of them would be subject to Commission deliberation and vote of its members, and the Commission cannot prejudge that action,” the SEC wrote Wednesday.
The SEC claimed the court’s decision on legal issues concerning the case would help determine the scope and need for further rulemaking, as well as “conclusively resolve the dispute about the Commission’s power to adopt the mandatory disclosure obligations on climate risk in the Rules.”
The agency passed the climate disclosure rule last spring by a 3-2 vote, with three Democrats — former SEC Chair Gary Gensler, Commissioners Caroline Crenshaw and Jaime Lizárraga — supporting it, and two Republicans — Commissioners Hester Peirce and Mark Uyeda — opposing it. The split vote hinged on the commissioners’ conflicting views on the SEC’s authority — or lack thereof — to probe companies for climate-related disclosures.
Gensler has since been replaced by Trump’s SEC Chair Paul Atkins, and Lizárraga departed the Commission in January, leaving Crenshaw as the agency’s only Democratic commissioner and lone supporter of the climate rule.
Crenshaw criticized the SEC for providing a “wholly unresponsive” answer in a statement following the release of its status report, and accused the agency of attempting to avoid its legal obligations under the Administrative Procedure Act, which governs how agencies make and repeal rules.
“The Court asked us in no uncertain terms ‘will [the Commission] adhere to the [R]ules if the petitions for review are denied[?]’” We did not — but should have — answered that question. The unspoken truth under this Commission is that the answer is ‘no,’” Crenshaw said Wednesday.
“The Commission simply does not want to say what we all know to be true by now — it has no intention of allowing the Climate-Related Disclosure Rules to go into effect,” she added.
