Majority of Lawyers Expect SEC’s Climate Disclosure Rule Will Not Survive Intact: Bloomberg Survey
A significant majority of attorneys expect that the U.S. Securities and Exchange Commission’s (SEC) new climate-related disclosure rule will not survive its legal challenges in its current form, with most expecting the rule to only partially remain intact, or to be overturned entirely, according to a new survey by Bloomberg Law.
The study, Bloomberg Law’s State of Practice survey, includes responses from 211 attorneys, including 136 law firm and 75 in-house respondents.
The SEC announced the release and adoption of the new rules in early March, two years after the Commission’s initial draft release, establishing for the first time requirements for public companies in the U.S. to provide disclosure on climate risks facing their businesses, plans to address those risks, the financial impact of severe weather events, and, in some cases, greenhouse gas emissions originating from their operations.
Right out of the gate, however, and even prior to its final release, the new rule has faced a series of legal challenges, including a court petition filed by energy services companies Liberty Energy and Nomad Proppant, requesting the stay pending a review of the rule, which was granted by the court, as well as a lawsuit against the rule filed by 25 Republican state attorneys general, led by Iowa AG Brenna Bird, and another appeals court motion requesting a stay of the rules led by the U.S. Chamber of Commerce.
Arguments against the rules claim that the requirements are too onerous and expensive for companies, that the information requested, including GHG emissions data, is not reliable or overly speculative, and that the rules exceed the SEC’s authority.
In light of the legal challenges, the SEC announced in April that it has paused the implementation of the new climate rule to await a court review.
According to the new Bloomberg survey, only a very small portion of respondents said that they expect the rule to remain wholly intact following the legal challenges, with more than half anticipating that it will survive only in part, and more than 29% of law firm and 25% of in-house respondents saying it will likely be wholly overturned.
By practice area, securities and capital markets and ESG-focused attorneys were the most likely to expect the rules to only partially remain intact, at over 70%, with labor and employment and litigation attorneys the least likely to expect the rule to partially survive at 49% and 53%, respectively, the survey found.
The survey respondents also highlighted the areas of the SEC’s climate rule that they expected to face the most significant legal challenges, with the biggest hurdles anticipated for disclosures on greenhouse gas (GHG) emissions at 37%, followed closely by climate-related targets and goals at 36%. Additional key hurdles identified included the rule’s requirement for certain information in financial statements (23%), risk mitigation strategy disclosure (22%), and governance disclosures (20%).
In a post discussing the survey findings, Bloomberg Industry Group Legal Analyst Abigail Gampher Takacs said:
“It’s too soon to tell what the ultimate resolution of the SEC climate rule will be, but attorneys don’t appear to be particularly optimistic about the rule overcoming all of the legal challenges it currently faces.”
Click here to read more about the survey.