A federal appeals court has placed a temporary hold on a federal rule advanced by the Securities and Exchange Commission that requires publicly traded companies to disclose climate-related financial risks to their business operations.
The Fifth Circuit Court of Appeals issued the order on Friday. It grants two energy companies – Liberty Energy Inc. and Nomad Proppant Services LLC – their motion for a stay on the SEC rule, which was adopted by the agency earlier this month. The action follows litigation filed by a number of parties, including the states of Louisiana and Texas, the energy companies and two business associations.
The petitioners have argued that the SEC has overstepped its authority, going beyond congressional mandates and financial issues and into the realm of climate activism. The SEC, however, maintains that its rule seeks only to have the climate-related data included in annual reports and registration statements.
““The Biden administration’s ill-advised war on hard-working Americans continues,” Louisiana Attorney General Liz Murrill said in a prepared statement. “Not only do these disclosure requirements fall outside of the commission’s authority and violate the First Amendment, but they also drive up business costs, which will then be passed on to the consumers.”
Also involved in the litigation is the Pacific Legal Foundation, which is representing the Texas Alliance of Energy Producers and Domestic Energy Producers Alliance. The foundation points out that the SEC already has in place regulations that require firms to reveal climate-change risks that could affect their profits.
““The SEC’s mandate is to ensure that companies disclose important information so that investors can evaluate the health of companies,” Luke Wake, one of the foundation’s attorneys, said in a statement emailed to the Louisiana Record. “That’s not a license to publicly shame companies for business practices they don’t like. Congress did not authorize the SEC to demand that companies report environmental or any other controversial issues completely unrelated to finance.”
Attorneys for the two energy companies said the rule would regulate a large swath of the nation’s economy under the pretense of mandating speculative data disclosures about climate-change impacts and issues affecting greenhouse gas emissions.
“Public companies must attempt to collect and calculate not just their own direct emissions and climate risks but also those of certain third parties, including climate risks faced by their suppliers,” the companies said in their petition for a stay.
In addition, the rule is arbitrary and capricious, according to the petition, and Congress has authorized the Environmental Protection Agency as the primary agency to oversee emissions disclosures.
“Never before has (the SEC) claimed the power to demand such broad ‘climate’-related disclosures, which will occupy a significant portion of public companies’ SEC filings and subject them to increased enforcement and litigation,” the energy companies’ petition states.
The Pacific Legal Foundation said the rule runs far afield of the agency’s primary task of protecting investors.
“Congress authorized the SEC to protect investors from fraud, facilitate capital formation and require only material disclosures related to investing,” the foundation said in a news release. “But requiring disclosure about whether and how much a company thinks and talks about climate change does little to advance those goals.”