Republican-led states vow to sue US SEC over climate risk disclosure rules

By Clark Mindock

(Reuters) -Nine Republican-led states will file a lawsuit challenging new U.S. rules that U.S.-listed companies must report climate-related risks, West Virginia Attorney General Patrick Morrisey said on Wednesday, hours after the Securities and Exchange Commission approved the rules.

   Morrisey said at a press conference the states including Georgia, Alabama and Alaska would file a petition in the 11th U.S. Circuit Court of Appeals challenging the rules, which aim to standardize climate-related company disclosures about greenhouse gas emissions, weather-related risks and how they are preparing for the transition to a low-carbon economy.

   The SEC, Wall Street’s top regulator, said the information would give investors reliable information about financial risks companies face related to climate change.

The SEC did not immediately respond to a request for comment on the planned lawsuit.

First proposed in 2022, the rules are part of Democratic President Joe Biden’s efforts to leverage federal agency rulemaking to address climate change threats. Similar disclosure requirements have been adopted in Europe and in California.

Republican-led states had been signaling their intent to challenge the rules for years, arguing in public comments in 2022 that they amount to back-door environmental regulations that go beyond the SEC’s legal authority.

They claimed then the rules would require companies to create, gather and disclose a “crushing” amount of material that goes well beyond the finance-based disclosures that investors need.

Anticipating legal challenges, the Biden administration dropped more ambitious elements of the rules requiring companies to disclose “Scope 3” emissions, indirect emissions by suppliers or customers.

For many businesses, Scope 3 emissions account for 70% of their carbon footprint, according to the consulting firm Deloitte.

The final SEC rules also allow larger companies to determine whether emissions from their own operations and the power they purchase constitute information investors need to make decisions.

Morrisey said that despite changes to the proposed rule, the finalized rule was still defective and unconstitutional.

In California state court, litigation has been already been filed by business groups including the U.S. Chamber of Commerce challenging that state’s climate disclosure laws, which include Scope 3 emissions disclosure requirements. That lawsuit filed in January said the state’s laws will impose “massive” costs on businesses and violate free speech protections in the U.S. Constitution by compelling the disclosures.

(Reporting by Clark Mindock, Editing by Alexia Garamfalvi and David Gregorio)