By Clark Mindock
(Reuters) – A major environmental group has sued to challenge new rules issued by the U.S. Securities and Exchange Commission requiring public companies to report climate-related risks, arguing they do not go far enough to protect investors.
The Sierra Club and the Sierra Club Foundation filed the lawsuit on Wednesday in the U.S. Court of Appeals for the D.C. Circuit. The groups argue the SEC arbitrarily stripped the final version of the rules of requirements for companies to disclose information about their “Scope 3” emissions, which are indirect emissions by suppliers or customers.
Those emissions disclosure requirements were included in an initial 2022 draft of the rules, which aim to standardize climate-related company disclosures. They were removed amid pressure and threats of legal action by industry groups and others.
Republican-led states and industry groups have already filed several lawsuits seeking to block the rules, but the Sierra Club’s case is the first to argue they are too weak.
The Sierra Club in a statement said the organization and its members manage millions of dollars in investments, which they cannot adequately manage without complete information about climate risks.
By failing to keep the more robust disclosure requirements in the rules approved this month, the SEC fell short of its responsibility under federal law to protect investors, the Sierra Club said.
The lawsuit seeks to force the SEC to reconsider its decision to weaken the rules.
An SEC spokesperson in a statement on Thursday said the agency will “vigorously” defend the climate disclosure rules in court.
First proposed in 2022, the rules are part of Democratic President Joe Biden’s efforts to leverage federal agency rulemaking to address climate change threats.
The rules require U.S.-listed companies to disclose greenhouse gas emissions, weather-related risks and how they are preparing for the transition to a low-carbon economy.
They were approved by the SEC on March 6, and the first legal challenge seeking to block them was filed later that day.
At least 25 Republican-led states including West Virginia, Texas and Ohio have so far challenged the rules in court, including in the 5th, 6th, 8th and 11th U.S. Circuit Courts of Appeals.
Those states have argued, among other things, that the disclosure requirements amount to back-door environmental regulations that go beyond the SEC’s legal authority.
Other challenges have also been filed by oilfield services companies and other energy industry groups.
The SEC on Wednesday told the 5th Circuit in one of those cases that the rules “fit comfortably within” its longstanding authority to require the disclosure of information that is important to investors, and said they were adopted to provide “consistent, comparable and reliable information” about climate risks.
(Reporting by Clark Mindock, Editing by Alexia Garamfalvi and Bill Berkrot)
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