S.E.C. Passes Environmental Disclosure Rule That Upsets Both Sides

On Wednesday, the Security and Exchange Committee approved a new rule that would require some publicly traded companies to disclose their greenhouse gas emissions and other climate threats. Since its proposal two years ago, the rule has drawn much public comment from lobbyists and legislators who claim the S.E.C. is overstepping its authority.

The S.E.C. heard the pushback and significantly weakened the rule in an attempt to avoid litigation upon the rule’s passing. Originally, the rule would require companies to report emissions that come from a source owned by the company, emissions that come from energy the company uses or purchases and emissions that derive from the supply line and customer use of the product.

In the rule passed Wednesday on a party-line vote by the S.E.C. commissioners, three Democrats to two Republicans, companies will only be required to report the emissions of their own sources and companies that they employ, and they will only have to report them if they themselves deem them “material.” 

Environmentalists and activists say this new watered-down rule, while certainly marked progress for the United States, still falls short of necessary environmental disclosures.

Leslie Samuelrich, president of Green City Funds, said, “It’s a step forward, but we feel it’s too little, too late.” 

SEC commissioner Caroline Crenshaw, who voted for the final rule said that the new rule, “does not have my unencumbered support given that important disclosures remain absent.”  

Despite the watering down of the new rule, it is still coming under fire from Republicans and big business.

David Zaring, a professor at Wharton Business School said, “The S.E.C. tried hard to mollify corporate America on how expensive this would be but there are enough companies and enough states who hate the idea of capital markets regulator taking on a climate role.”

Soon after the rule passed, West Virginia Attorney General Patrick Morrisey (R) announced that ten states were filling a challenge in the U.S. Court of Appeals for the 11th Circuit. Two fracking companies, Liberty Energy and Nomad Proppant, have also filed suits in the 5th U.S. Circuit Court of Appeals, a notoriously conservative court. 

If the rule holds up in court, it will go into effect in 2026, when companies with more than $700 million in outstanding shares must begin their environmental disclosures. Companies with $75 million in outstanding shares will begin having to disclose environmental information in 2028.