Sierra Club sues SEC over climate disclosure rule

Environmental advocacy group the Sierra Club is suing the Securities and Exchange Commission (SEC), arguing the agency’s new rule doesn’t give investors the full truth about a company’s climate risks.

The Sierra Club and the Sierra Club Foundation, represented by Earthjustice, filed the lawsuit Wednesday, joining a growing list of states that have filed challenges to the rule.

The rule in question requires publicly traded companies to reveal some risks that climate change poses to their business. It also requires large and midsize companies to disclose how much carbon dioxide their operations emit. 

While nearly 20 states have opposed the SEC’s rule, arguing that it creates unnecessary burdens for businesses to reveal information they may want to keep confidential, the Sierra Club said consumers deserve to know the climate impacts the companies they are investing in have.

“These investors cannot adequately manage their investments without complete information on publicly-traded companies’ vulnerability to climate-related risks, including greenhouse gas emissions profiles,” the statement said. “By allowing companies to selectively report their emissions, the SEC has fallen short of its statutory mandate to protect investors, maintain fair, orderly, and efficient markets, and promote capital information.”

The organizations affirm the SEC’s legal authority to require climate-based disclosures and are calling on the agency to “fulfill its obligation to protect investors.”

Hana Vizcarra, a senior attorney at Earthjustice, said in a statement that the SEC’s rule fails to require companies to show investors the full climate risks they pose.

“While it has the legal authority to issue the rule, the SEC succumbed to industry pressure and finalized a rule that opens investors to greenwashing and rapidly widening disclosure gaps,” Vizcarra said.

The SEC’s rule was finalized last week. Since then, several states have filed lawsuits arguing the mandate imposes “costly red tape on businesses” and will “devastate” supply chains.

While the states argue the rule goes too far, the Sierra Club said it does not go far enough, especially after the SEC dropped proposed requirements for some companies to report emissions that come from the use of their products, like oil companies reporting the emissions caused by the burning of their fuel to power cars across the country.

“Through legal action, we hope to ensure that all investors, including the Sierra Club and its members, have the information they need to evaluate companies’ climate-related risks, make smart investment decisions, and protect their assets for decades to come,” Ben Jealous, the executive director of the Sierra Club, said in a statement.

“The Commission undertakes rulemaking consistent with its authorities and laws governing the administrative process and will vigorously defend the final climate risk disclosure rules in court,” an SEC spokesperson said in an emailed statement.

Story was updated at 8:15 p.m.