The Biden administration officially approved a controversial rule on Wednesday mandating that companies disclose financial risks related to climate change, sparking a whirlwind of responses.
Environmental organizations criticized the rule for not being tough enough, while Republican officials from ten states have swiftly filed lawsuits to halt its implementation.
On March 6, along party lines with a 3-2 vote, the Securities and Exchange Commission (SEC) gave the green light to the climate disclosure rule.
This regulation establishes stricter guidelines for how companies convey information to investors regarding greenhouse gas emissions and risks associated with weather patterns.
“Today, the Biden administration has once again gone on the attack against America’s energy industry,” West Virginia Attorney General Patrick Morrisey said at a press conference.
Describing the rule as potentially “one of the most egregious attempts yet” to weaken U.S. fossil fuel production, Mr. Morrisey accused the Biden administration of utilizing a regulatory agency aimed at combating financial misconduct as a “backdoor” to undermine the energy sector.
All three Democratic members of the SEC, including SEC Chair Gary Gensler, cast their votes in support of the rule. Gensler noted that both investors and issuers are driving the demand for these new standards.
“Today, investors representing literally tens of trillions of dollars support climate-related disclosures because they recognize that climate risks can pose significant financial risks to companies, and investors need reliable information about climate risks to make informed investment decisions,” Mr. Gensler said in a statement.
The SEC projects that approximately 2,800 U.S. companies will need to adhere to the disclosure requirements related to climate issues.
Both Republican SEC commissioners opposed the rule, which enforces stricter requirements on publicly traded companies to provide more detailed information in their financial statements regarding the risks posed by climate change to their operations.
Additionally, it mandates that such companies disclose details about their own role in contributing to climate change.
“However well-intentioned, these particularized interests don’t justify forcing investors who don’t share them to foot the bill,” Peirce said.
“This is yet another attempt to advance an agenda without statutory authority, and I for one am not going to let that happen,” Mr. Morrisey said at the press conference Wednesday, while announcing that a coalition of ten states has filed a petition for review of the new rule by the U.S. Court of Appeals for the 11th Circuit.
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