The SEC's Final Climate Disclosure Rules

On March 6, 2024, almost two years after its originally proposed rules, the Securities and Exchange Commission (SEC) adopted final rules relating to the enhancement and standardization of climate-related disclosures. While the final rules still represent a sweeping overhaul of current disclosure requirements and will substantially expand the reporting obligations for public companies, the SEC scaled back some of the most onerous proposals, eliminating Scope 3 greenhouse gas (GHG) emissions disclosures entirely, scaling back attestation requirements, eliminating the requirement to disclose director expertise, narrowing the financial statement disclosures, and further scaling disclosures benefitting smaller reporting companies, as well as adding materiality qualifiers throughout.

As expected, the final rules quickly became the subject of several legal challenges, and on March 15, 2024, the Court of Appeals for the Fifth Circuit stayed the effectiveness of the final rules pending review in the proceeding before it, which had been brought by an energy company and had been joined by the U.S. Chamber of Commerce, among others. The plaintiffs brought this action in the same court that vacated the SEC’s share repurchase disclosure rules in 2023. Additionally, other groups have brought legal challenges asserting that the final rule did not go far enough. At this point, it is too early to predict the ultimate outcome of the various legal challenges.

In this client alert, we first provide a brief high-level summary of the final rules and our take on their impact on public companies, including foreign private issuers. This is then followed by a more detailed description of each of the new disclosure requirements and a number of action items for public companies.

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