The Sierra Club, a prominent environmental advocacy group, has initiated legal action against the Securities and Exchange Commission (SEC), challenging the agency’s recently enacted rule for allegedly failing to provide investors with comprehensive information regarding companies’ climate risks.
In a lawsuit filed on Wednesday, the Sierra Club and the Sierra Club Foundation, represented by Earthjustice, joined a growing chorus of opposition to the SEC’s rule, which mandates publicly traded companies to disclose certain climate-related risks and their carbon dioxide emissions.
The crux of the Sierra Club’s argument lies in the belief that investors are entitled to full transparency regarding the climate impacts of the companies in which they invest. The lawsuit contends that incomplete information on climate-related risks hinders investors’ ability to make informed decisions about their investments.
“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.”
The Sierra Club and Earthjustice maintain that the SEC possesses the legal authority to mandate climate-related disclosures and urge the agency to fulfill its responsibility to safeguard investors’ interests.
Hana Vizcarra, a senior attorney at Earthjustice, criticized the SEC’s rule for purportedly falling short in compelling companies to disclose the full extent of their climate risks. Vizcarra asserted that the SEC, influenced by industry pressure, missed an opportunity to ensure transparency and instead left room for “greenwashing” and significant disclosure gaps.
The SEC’s rule, finalized last week, has sparked controversy, with several states challenging its imposition, citing concerns about burdensome regulatory requirements that could disrupt business operations and supply chains.
While some states argue that the rule imposes undue regulatory burdens, the Sierra Club contends that it does not go far enough, particularly in light of the SEC’s decision to drop proposed requirements for companies to report emissions resulting from the use of their products, such as oil companies disclosing emissions from the combustion of their fuel in vehicles.
Sierra Club’s Executive Director, Ben Jealous, underscored the importance of legal action in ensuring that investors have access to comprehensive information to evaluate climate-related risks and make informed investment decisions.
In response to the lawsuit, an SEC spokesperson emphasized the agency’s commitment to upholding its authorities and laws governing the administrative process, affirming its intent to vigorously defend the final climate risk disclosure rules in court.
