SEC pauses legal defense of its climate-related disclosures rule

The SEC intends to ask courts to delay proceedings related to legal challenges to the commission’s climate rule, according to a statement published Tuesday by the SEC’s acting chair.

Citing “changed circumstances,” Mark Uyeda said he has directed SEC staff to request additional time for deliberation related to litigation facing The Enhancement and Standardization of Climate-Related Disclosures for Investors, which had been set for implementation for the fiscal year beginning 2025 before legal challenges and now a potential turn in the view of the SEC itself came into play.

“I have directed the Commission staff to notify the Court of the changed circumstances and request that the Court not schedule the case for argument to provide time for the Commission to deliberate and determine the appropriate next steps in these cases,” Uyeda said in the statement. “The Commission will promptly notify the Court of its determination about its positions in the litigation.”

The SEC’s first climate rule, passed in March of 2024, immediately faced legal challenges on multiple fronts — challenges that the SEC initially agreed to argue against once the Eighth Circuit scheduled arguments in the consolidated case.

“The Commission’s briefs previously submitted in the cases consolidated in the Eighth Circuit do not reflect my views,” Uyeda wrote.

The SEC approved the rule 3–2 in a vote that followed political party lines, supported by the three Democratic commissioners and opposed by the two Republican commissioners. Uyeda cast one of the no votes, and currently the commission is comprised of the same two Republicans (Uyeda and Hester Peirce) and a Democrat (Caroline Crenshaw) appointed by President Donald Trump in 2020. Rules limit the number of commissioners from any one political party to three when the commission is at its full strength of five, an ongoing process under the second Trump administration since two Democrats — Chair Gary Gensler and Commissioner Jaime Lizárraga — stepped down from their posts.

“The only things that have changed since the rule was passed have been matters of politics and not substance,” Crenshaw said in a statement. “As such, I disagree with the position unilaterally taken today by the acting chairman.”

Uyeda, in his statement, cited “the recent change in the composition of the Commission” and the January executive order calling for a freeze on new regulations as reasons for his action.

“The rule is deeply flawed and could inflict significant harm on the capital markets and our economy,” Uyeda wrote. “Both Commissioner Peirce and I voted against the rule’s adoption. Commissioner Peirce said that then-existing disclosure rules were sufficient and that the ‘rule’s anticipated benefits do not outweigh the costs.’ She argued that ‘only a mandate from Congress should put us in the business of facilitating the disclosure of information not clearly related to financial returns.’ I stated that the Commission was ‘without statutory authority or expertise’ to address climate change issues and that ‘this rule is climate regulation promulgated under the Commission’s seal.'”

— To comment on this article or to suggest an idea for another article, contact Bryan Strickland at Bryan.Strickland@aicpa-cima.com.