The SEC Is Not a Climate Regulator: The SEC's 2024 Final Climate-Related Risk Disclosure Rule and Its Consequences
Vol. 48
May 2025
Page
Over twenty years ago the Climate Disclosure Project, an organization representing large scale investors, called on public corporations to disclose information about climate-related risks that impacted their financial outlook. From 2003 to 2010, minimal progress was made toward increased climate-related risk disclosures. In 2010, the SEC issued a voluntary guidance which represented the first step toward regulating climate-related risk disclosures. However, the SEC’s 2010 Guidance proved to have little effect as public company disclosures revealed drastically inconsistent data, if companies chose to engage at all. Efforts begun in 2010 culminated on March 6, 2024, when the SEC voted 3-2 to promulgate The Enhancement and Standardization of Climate-Related Disclosures for Investors (the “Final Rule”), a mandatory disclosure regime directed at climate-related financial risks.
This article defines the climate related weather events, legislation, and decades long public pressure campaign that elicited the SEC’s Final Rule. This is followed by an explanation of the disclosure requirements created by the Final Rule’s amendments to regulation S-K Subpart 1500 and Article 14 regulation S-X of the code of federal regulations. Next, the statutory authority and regulatory history that enabled the SEC to promulgate the Final Rule are detailed. Then, potential impacts and real-world consequences of each major component of the Final Rule is assessed both to consider its efficacy. This section will also discuss how the impacts of the Final Rule support the SEC’s position that although the superficial theme of the rule—climate change—lays outside the SEC’s authority, the true subject matter targeted by the rule—climate-related financial risks—falls well within the ambit of the SEC’s enabling statutes. The final section summarizes current legal challenges to the Final Rule and explores the SEC’s potential responses before concluding that, unless the Eighth Circuit follows the current theme of judicial skepticism of agency authority, the Final Rule should survive.
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Vol. 48
May 2025
Page
Over twenty years ago the Climate Disclosure Project, an organization representing large scale investors, called on public corporations to disclose information about climate-related risks that impacted their financial outlook. From 2003 to 2010, minimal progress was made toward increased climate-related risk disclosures. In 2010, the SEC issued a voluntary guidance which represented the first step toward regulating climate-related risk disclosures. However, the SEC’s 2010 Guidance proved to have little effect as public company disclosures revealed drastically inconsistent data, if companies chose to engage at all. Efforts begun in 2010 culminated on March 6, 2024, when the SEC voted 3-2 to promulgate The Enhancement and Standardization of Climate-Related Disclosures for Investors (the “Final Rule”), a mandatory disclosure regime directed at climate-related financial risks.
This article defines the climate related weather events, legislation, and decades long public pressure campaign that elicited the SEC’s Final Rule. This is followed by an explanation of the disclosure requirements created by the Final Rule’s amendments to regulation S-K Subpart 1500 and Article 14 regulation S-X of the code of federal regulations. Next, the statutory authority and regulatory history that enabled the SEC to promulgate the Final Rule are detailed. Then, potential impacts and real-world consequences of each major component of the Final Rule is assessed both to consider its efficacy. This section will also discuss how the impacts of the Final Rule support the SEC’s position that although the superficial theme of the rule—climate change—lays outside the SEC’s authority, the true subject matter targeted by the rule—climate-related financial risks—falls well within the ambit of the SEC’s enabling statutes. The final section summarizes current legal challenges to the Final Rule and explores the SEC’s potential responses before concluding that, unless the Eighth Circuit follows the current theme of judicial skepticism of agency authority, the Final Rule should survive.