Attempting to Enhance Corporate Climate Responsibility, U.S. Securities and Exchange Commission Issues New Rules

May 2024

Environmental, Energy, & Climate Change Law and Regulation Reporter, Volume 4, Number 8

In recent years, the conversation around climate change has shifted from a peripheral concern to a central focus in global policy, finance, and corporate governance. In response to growing investor demands for transparency and accountability on environmental risks, on March 6, 2924, the U.S. Securities and Exchange Commission (SEC) adopted the Climate Disclosure Rules aimed at enhancing climate change disclosure by publicly traded companies and in public offerings. On April 4, 2024, the SEC voluntarily stayed implementation of the Climate Disclosure Rules pending completion of judicial review of consolidated challenges to the rules by the Court of Appeals for the Eighth Circuit.

The SEC, as the primary regulator overseeing securities markets in the United States, plays a crucial role in ensuring that investors receive accurate and timely information to make informed investment decisions. According to the SEC, “climate-related risks can affect a company’s business and its current and longer-term financial performance and position” and these new rules “will provide investors with consistent, comparable, and decision-useful information.”

Historically, climate-related information was often relegated to voluntary or supplementary disclosures. But with the increasing recognition of climate change as a systemic risk to the economy, the SEC has moved towards formalizing disclosure requirements. This shift reflects a broader acknowledgement within the financial community of the need to integrate environmental considerations into investment decision-making processes.

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