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SEC Signals Potential Strategy Shift in Climate Disclosure Rule Litigation

February 14, 2025 | Posted by Lauren M. Assaf-Holmes; Ronald O. Mueller; Lori Zyskowski; Thomas J. Kim; James J. Moloney Topic(s): Corporate Governance; Disclosure; Environmental/Climate Change; ESG; Securities Regulation

On Tuesday, Mark Uyeda, Acting Chairman of the Securities and Exchange Commission (the “SEC”), issued a statement signaling potential updates to the SEC’s position in the ongoing legal challenges to its climate disclosure rule. As previously reported, the SEC stayed its climate disclosure rule last year pending the outcome of the related consolidated litigation before the Eighth Circuit Court of Appeals.

Acting Chairman Uyeda outlined several circumstances he believes “bear on the conduct” of the litigation, including:

  • his and Commissioner Hester Peirce’s votes against the rule’s adoption; both have questioned the SEC’s legal authority to mandate climate-related disclosure;
  • similar concerns raised by commenters to the proposed climate disclosure rule, in addition to the rule’s potential financial burdens and overlap with existing requirements;
  • the differences between his views and the SEC’s previously submitted briefs in the litigation; and
  • the changes in SEC leadership and the regulatory freeze on rulemaking imposed by the new Administration.

On this basis, he has instructed SEC staff (the “Staff”) to ask the Eighth Circuit to hold off on scheduling arguments in the case so the SEC may “deliberate and determine the appropriate next steps in these cases” and “promptly notify the Court of its determination about its positions in the litigation.” SEC Commissioner Caroline Crenshaw issued a separate statement expressing her disagreement with the instruction and reiterating her belief in the SEC’s authority to adopt the climate disclosure rule.

The directed review may ultimately result in the climate disclosure rule being amended or rescinded. This would not be the first time the SEC has revisited and undone contentious rulemakings following a change in its leadership and presidential administration. In 2021, for example, a few months after his appointment, SEC Chairman Gary Gensler directed the Staff to re-examine its guidance and 2020 amendments to rules related to proxy voting advice (specifically, to Rules 14a-1(l), 14a-2(b), and 14a-9). The Staff announced the same day that it would not enforce the rules while conducting its review. At the time, the rule amendments were similarly subject to ongoing legal challenges. In 2017, Acting Chairman Michael Piwowar directed the Staff to consider future action on the conflict minerals rule in light of pending litigation challenges at the time, and the Staff announced that day that certain of the rule’s provisions would not be enforced.

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