Republicans see 'victory' in court putting SEC's climate-disclosure rules on ice

House Republicans took a victory lap on Monday after a federal appeals court pressed pause on new rules from the Securities and Exchange Commission that would require publicly listed companies to disclose climate risks.

The rules have been blasted by Republicans, who say the agency is overstepping authority, and subjected to a series of lawsuits. GOP members of the House Financial Services’ Subcommittee on Oversight and Investigations celebrated the Friday ruling from the Fifth U.S. Circuit Court of Appeals, which came in response to a lawsuit from oil-field-services companies.

Subcommittee Chair Bill Huizenga (R-Mich.) said the action “signals the SEC’s authority to develop, finalize and implement a climate disclosure rule is in jeopardy.”

Vice Chairman John Rose (R-Tenn.) pledged that Republicans “will continue to speak out and stand up against this regulatory regime until it is removed in its entirety.” 

“Today, I can confidently say that we have already secured a victory by forcing the SEC to remove Scope 3 of the proposed rule. But our work is not done,” Rose said. 

The SEC argues the rule will allow investors to track emissions data, which is “materially” important to a company’s climate-related risks and financial future.

Compared to the first version of the rule in 2022, the finalized version dropped language that would have required companies to track emissions from all aspects of their supply chain. But that has not quelled Republican opposition.

Nearly 20 GOP-led states have sued the SEC over the climate rule this month, arguing it creates unnecessary burdens for businesses and forces them to reveal information that they may need to keep confidential.

“[SEC] Chair [Gary] Gensler and many in the media want you to believe that this is a modest compromise rule that is in line with the SEC’s historical powers — don’t be fooled,” Whitney Hermandorfer, director of strategic litigation for the Tennessee Attorney General’s office, said during her witness testimony Monday.

Tennessee joined other states in suing the SEC over the final rule in the Sixth Circuit. All suits against the finalized rule will be combined and handled by another U.S. Circuit Court of Appeals, Hermandorfer said in her written testimony. 

“Unless he radically alters this approach to our capital markets, Gary Gensler’s legacy will be that of an overzealous bureaucrat who has repeatedly been reigned in by the courts,” Huizenga said. 

In a statement upon adopting the rules earlier this month, Gensler said the measure was building on nearly a century of financial markets regulation.

“Our federal securities laws lay out a basic bargain. Investors get to decide which risks they want to take so long as companies raising money from the public make what President Franklin Roosevelt called ‘complete and truthful disclosure,’” he said.

“Over the last 90 years, the SEC has updated, from time to time, the disclosure requirements underlying that basic bargain and, when necessary, provided guidance with respect to those disclosure requirements.”