Companies Not Waiting for Court Decisions on SEC Climate Disclosure Rules

After two years of serious consideration, including review of a record number of public comments the agency received on the draft rule, the Securities & Exchange Commission issued its final corporate climate disclosure rules on March 6. Anti-ESG critics quickly moved into action, with various state attorneys general, the U.S. Chamber of Commerce, state treasurers and finance heads, and others, attacking the rule with court challenges and other measures.

Several lawsuits were filed to prevent the SEC from implementing the rules, which have been consolidated in the U.S Court of Appeals for the Eighth Circuit (covering the states of Arkansas, Iowa, the Dakotas, Minnesota, Missouri, and Nebraska). The final decision may well end up being decided by the U.S. Supreme Court. While the legal actions are playing out, the SEC has stayed its rules.

With the SEC disclosure rules on hold, the anti-ESG forces are making climate and ESG into prominent issues in Congress and in 2024 political campaigns. Several committees in the U.S. House of Representatives have passed measures to try to prevent financial institutions from using ESG factors in investment decision-making. Depending on election outcomes this year, there could be more actions to rein in ESG policies in the next Congress.

In monitoring what U.S. companies are doing as the SEC disclosure rules are on hold, this headline grabbed our attention and is one of our Top Stories: “Alive and Kicking: The Future of ESG.” The commentary is from CCI, an independent, free, web-based news source focused on compliance, ethics, and risk management. Jennifer Gaskin, CCI’s editorial director, begins with the observation that “…few companies are spending time relaxing and even fewer are abandoning their ESG commitments” while waiting for the outcome of the court cases challenging the SEC’s new climate disclosure rules. She posits: They cannot afford to.

A major factor cited is the proliferation of international ESG / sustainability reporting frameworks, especially including moves in the European Union (CSRD, ESRS) and the Corporate Sustainability Standard Board’s voluntary framework. California’s climate reporting rule will affect many public and private companies.

In a Harvard Law School Forum on Corporate Governance commentary by the law firm Latham & Watkins, also a Top Story in this issue, market actors are looking for ways to more fully integrate climate risks into business decisions. Internally, many corporate executives are examining climate-related costs and impacts, and the complexity of cross-jurisdictional climate-related reporting.

These topics are currently being explored in depth in G&A Institute’s Pathfinder webinar series. G&A Institute team members are also working with corporate clients moving forward in their sustainability journeys and preparing more complete disclosures on their progress to better inform their stakeholders. These Top Stories explain “why” enlightened corporate managers are pressing on despite the attitudes of the anti-ESG voices. For sure there is more news to come on pro-and anti-ESG actions.

This is just the introduction of G&A's Sustainability Highlights newsletter this week. Click here to view the full issue.