On March 6, 2024, the SEC voted 3-2 to adopt final rules requiring public companies, excluding investment companies but not excluding business development companies, to disclose climate-related information in their registration statements and annual reports. Following multiple lawsuits challenging the final rules, the SEC voluntarily stayed the final rules on April 4, 2024 pending resolution of the consolidated lawsuits, as discussed below.
The final rules will require public companies to disclose, among other matters, information about climate-related risks that have had or are reasonably likely to have a material impact on the company’s business strategy, results of operations, or financial condition; the actual and potential material impacts of those risks; activities to mitigate or adapt to such risks; the process for identifying, assessing, and managing those risks; the board of directors’ oversight of climate-related risks; information on any material climate-related targets or goals; and the financial statement effects (e.g., costs and losses) of severe weather events and natural conditions (e.g., hurricanes, flooding, drought, wildfires, and sea level rise). The final rules scale back certain requirements in the March 2022 proposing release, including by requiring disclosure of material Scope 1 and Scope 2 greenhouse gas emissions (GHG) only for large accelerated filers and accelerated filers, and eliminating Scope 3 GHG emission disclosure requirements altogether. The SEC received over 4,500 unique comment letters and over 18,000 form letters in response to the proposing release.
The required compliance dates for the final rules will be phased in and are dependent upon whether the company is a large accelerated filer, accelerated filer, non-accelerated filer, smaller reporting company, or emerging growth company, and are also dependent on the particular required disclosure. The earliest compliance requirements apply with respect to fiscal years beginning in 2025, and the latest apply to fiscal years beginning in 2033.
The SEC’s adoption of the final rules was met nearly immediately with lawsuits from attorneys general of numerous states and other parties filed across numerous U.S. Circuit Courts of Appeals. On March 21, 2024, the cases were consolidated in the Eighth Circuit. Seeking to facilitate the resolution of the legal challenges, the SEC voluntarily stayed the final rules on April 4, 2024, pending the Eighth Circuit’s review of the consolidated cases.
The adopting release is available here, a related fact sheet is available here, and a related press release is available here.
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