5th Circuit Stays SEC Climate Disclosure Rule

The U.S. 5th Circuit Court of Appeals issued on March 15 an administrative stay of the climate disclosure rule finalized on March 6 by the Securities and Exchange Commission. The order did not elaborate on the basis for the stay, and the court does not have additional hearings scheduled at this time.

The SEC’s “The Enhancement and Standardization of Climate-Related Disclosures for Investors” has a staggered compliance schedule slated to start in 2025. Public companies will have to disclose, in their reporting for 2025, the climate risks material to their business; the companies’ strategies for reducing those risks and related costs; the processes the companies use for managing and identifying climate risks; and any losses from severe weather events. Larger companies will also have to disclose their direct greenhouse gas emissions and emissions from their power consumption, known as Scope 1 and 2 emissions, respectively, starting in 2026.

The stay was granted in Liberty Energy v. SEC, brought by the states of Texas, Louisiana and Mississippi (those in which federal cases are appealed to the 5th Circuit), along with two fossil fuel companies, two fossil fuel industry groups and the business advocacy group U.S. Chamber of Commerce. The rule also faces two separate challenges from Republican-led states in the 8th Circuit (Arkansas, Iowa, Minnesota, Missouri, Nebraska, North Dakota, South Dakota) and 11th Circuit (Alabama, Florida, Georgia).

The SEC argued that since the rule is not in effect—it goes into effect 60 days after it is published in the “Federal Register”—and no theoretical harm is imminent (no reporting will be required until March 2026 reporting for the 2025 year), it is premature to request an administrative stay. The regulator added that “the rules fit comfortably within the Commission’s long-standing authority to require the disclosure of information important to investors in making investment and voting decisions.”

The rule was singled out by Republican members of the House Committee on Financial Services during a Monday field hearing on the rule in Lebanon, Tennessee. Representatives present at the hearing characterized the rule as unlawful overreach on the part of the SEC to appease left-wing climate activists.

Representative Bill Huizenga, R-Michigan, said the rule will “significantly hurt our economy while serving as a boon for special interest groups and far left activists.” Representative Andy Ogles, R-Tennessee, argued that the rule is part of the SEC’s “obsession with the climate change religion, and that is what’s become: a religion.”