Weinberg & Company

Best Practice March 2024

Flood of Lawsuits Attempts to Sink Climate Disclosure Rules–

Within days of the SEC’s March 6 adoption of its long awaited climate risk and carbon emission disclosure rules, 3 separate lawsuits are challenging the regulations. Additional lawsuits likely are expected from both those claiming that the SEC went too far, and from groups angry that it didn’t go far enough.

These lawsuits were filed in spite of the fact that the final rules were scaled back from what the SEC first proposed in March 2022. The Commission eliminated the Scope 3 disclosure provision, which would have required companies to disclose emissions generated through its supply chain and those associated with their customers. It did include requirements for both Scope 1 and Scope 2 emissions, but said the disclosures would be required only from larger reporting companies and only if the information was deemed “material” and thus important to investors.

In its 3-to-2 vote to adopt The Enhancement and Standardization of Climate-Related

Disclosures for Investors Rule, the SEC requires registrants to disclose Scope 1 emissions– described as direct greenhouse gas emissions (GHG) generated by the company, and Scope 2 emissions, which refer to disclosures about a registrants’ indirect emissions from purchased energy.

Regardless of the SEC’s softening of these disclosure requirements, opponents say the requirements listed in the nearly 900-page mandate pose a financial burden on companies and that the commission has overstepped its authority in their adoption.

So far 13 state attorneys general and two energy companies have petitioned both the 11th and 5th Circuit US Court of Appeals to vacate the SEC’s rules. Additionally, some environmental groups may also file suit, upset that the final rules abandoned the Scope 3 emission requirements.

In the absence of judicial action, an SEC fact sheet lists some of the required disclosures that registrants will need to provide:

·    Climate-related risks that have had or are reasonably likely to have a material impact on the registrant’s business strategy, results of operations, or financial condition;

·    The actual and potential material impacts of any identified climate-related risks on the registrant’s strategy, business model, and outlook;

·    If, as part of its strategy, a registrant has undertaken activities to mitigate or adapt to a material climate-related risk, a quantitative and qualitative description of material expenditures incurred and material impacts on financial estimates and assumptions that directly result from such mitigation or adaptation activities;

·    Specified disclosures regarding a registrant’s activities, if any, to mitigate or adapt to a material climate-related risk including the use, if any, of transition plans, scenario analysis, or internal carbon prices;

·    Any oversight by the board of directors of climate-related risks and any role by management in assessing and managing the registrant’s material climate-related risks;

·    Any processes the registrant has for identifying, assessing, and managing material climate-related risks and, if the registrant is managing those risks, whether and how any such processes are integrated into the registrant’s overall risk management system or processes;

·    Information about a registrant’s climate-related targets or goals, if any, that have materially affected or are reasonably likely to materially affect the registrant’s business, results of operations, or financial condition. Disclosures would include material expenditures and material impacts on financial estimates and assumptions as a direct result of the target or goal or actions taken to make progress toward meeting such target or goal;

·    For large accelerated filers (LAFs) and accelerated filers (AFs) that are not otherwise exempted, information about material Scope 1 emissions and/or Scope 2 emissions;

·    For those required to disclose Scope 1 and/or Scope 2 emissions, an assurance report at the limited assurance level, which, for an LAF, following an additional transition period, will be at the reasonable assurance level;

·    The capitalized costs, expenditures expensed, charges, and losses incurred as a result of severe weather events and other natural conditions, such as hurricanes, tornadoes, flooding, drought, wildfires, extreme temperatures, and sea level rise, subject to applicable one percent and de minimis disclosure thresholds, disclosed in a note to the financial statements;

·    The capitalized costs, expenditures expensed, and losses related to carbon offsets and renewable energy credits or certificates (RECs) if used as a material component of a registrant’s plans to achieve its disclosed climate-related targets or goals, disclosed in a note to the financial statements; and

·    If the estimates and assumptions a registrant uses to produce the financial statements were materially impacted by risks and uncertainties associated with severe weather events and other natural conditions or any disclosed climate-related targets or transition plans, a qualitative description of how the development of such estimates and assumptions was impacted, disclosed in a note to the financial statements.

The compliance calendar is phased: Large Accelerated Filers will be required to comply in Fiscal Year Beginning with 2025, Accelerated Filers in Fiscal Year Beginning 2026 and Small Reporting Companies (SRCs), Emerging Growth Companies (EGCs) and Non-Accelerated Filers (NAFs) in Fiscal Year Beginning 2027.

Both Large Accelerated Filers and Accelerated Filers are required to start disclosing Greenhouse Gas Emissions in Fiscal Year Beginning 2026. As noted above, SRCs, EGCs and NAFs currently are not required to report on Greenhouse Gas Emissions.

For a detailed reading of the adopted rule, please see:


To read the lawsuit filed by the states, West Virginia v SEC, please see:


Our firm provides the information in this e-newsletter for general guidance only, and does not constitute the provision of legal advice, tax advice, accounting services, investment advice, or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal, or other competent advisers. Before making any decision or taking any action, you should consult a professional adviser who has been provided with all pertinent facts relevant to your particular situation. Tax articles in this e-newsletter are not intended to be used, and cannot be used by any taxpayer, for the purpose of avoiding accuracy-related penalties that may be imposed on the taxpayer. The information is provided “as is,” with no assurance or guarantee of completeness, accuracy, or timeliness of the information, and without warranty of any kind, express or implied, including but not limited to warranties of performance, merchantability, and fitness for a particular purpose.