Regulatory Tracker

Financial Regulation, Climate Change, and Climate-related Risk Disclosure

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Quick Take

The Securities and Exchange Commission (SEC) released its final climate-related risk disclosure rule in March 2024, which will  require companies to disclose information about financial and business risks posed by climate change. Litigation challenging the rule is underway, and the SEC issued an administrative stay of the final rules pending judicial review of the consolidated Eighth Circuit petitions.

Why it Matters

The impacts of climate change pose enormous risk to the U.S. financial system. These risks can be physical, such as damaged infrastructure and transportation networks due to increasingly severe weather events, wildfires, and sea-level rise, or transitional, such as investment values changing with underlying shifts in energy and climate policy or consumer demand. This climate-related risk results in financial risk for businesses and investors. At the same time, a growing number of companies are setting net-zero goals and other GHG emissions targets, but their reporting is too fragmented and inconsistent to be useful to investors and regulators. Financial regulators are taking steps to understand how climate risks can affect companies, investors, and financial markets.

Due to the potential impact of climate change on public companies’ future financial performance, many investors are demanding information on climate-related risks, and companies have started to build out their disclosures in response. Concerned that voluntary climate disclosures do not adequately protect investors, the SEC determined that additional disclosure requirements are necessary to provide consistent, comparable information about climate risks in the financial markets.

The SEC requires publicly traded companies to disclose a range of information related to business risks through regular filings. As part of the SEC’s mission to protect investors and maintain fair markets, the commission has broad authority to promulgate disclosure requirements that are “necessary or appropriate in the public interest or for the protection of investors.” (15 USC 77g, 15 USC 78l, 78m, and 78o)

In addition to the SEC, other financial regulatory agencies, such as the Federal Reserve, the Department of Treasury, the Commodity Futures Trading Commission, the Federal Deposit Insurance Corporation, and the Department of Labor’s Employment Benefits Security Administration have taken action to understand and address climate-related risk in the financial sector.

Current Status

On March 6, 2024, the SEC narrowly voted to release its long-awaited final climate-related risk disclosure rule, which requires public companies to report on material climate-related risks that affect to the business and, for some large companies, greenhouse gas emissions, if material. The rule was slated to go into effect 60 days after publication in the Federal Register with companies starting to comply in 2026. However, the SEC stayed the rule in April 2024. Consolidated litigation challenging the rule is underway in the Eighth Circuit.

Timeline of Events

OBAMA ADMINISTRATION
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Jan. 27, 2010 The Securities Exchange Commission votes to publish “Commission Guidance Regarding Disclosure Related to Climate Change,” which details how existing SEC disclosure rules applicable to certain mandatory financial filings for publicly traded companies should apply to risks associated with anthropogenic climate change.

Feb. 8, 2010 The guidance goes into effect, and the SEC publishes an interpretive release regarding existing disclosure requirements’ application to climate change.

Jul. 7, 2011 Representative Bill Posey introduces H.R. 2603 in the House of Representatives, and Senator John Barrasso introduces an identical bill, S. 1393, in the Senate. The bill, which would prohibit the SEC from issuing any interpretive guidance or initiating any administrative action that relates to their “Commission Guidance Regarding Disclosure Related to Climate Change,” was referred to committee.

 Apr. 22, 2016 The SEC publishes a concept release seeking public comment on modernizing disclosure requirements. The publication includes requests for comment on considering climate-related and environmental, social and governance (ESG) information in disclosure requirements.

TRUMP ADMINISTRATION
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Jun. 15, 2017 The Task Force on Climate-Related Financial Disclosures publishes a report establishing recommendations for a climate reporting framework that provides clear, comparable, and consistent information to investors about the risks and opportunities presented by climate change.

Jan. 7, 2020 The Office of Compliance Inspections and Examinations of the SEC announces their examination priorities for fiscal year 2020. The document lists the “accuracy and adequacy” of registered investment advisors’ ESG disclosures as one of its examination priorities for 2020.

Jan. 30, 2020 SEC chairman Jay Clayton issues a statement supporting the agency’s current approach to ESG disclosures and encouraging “market participants to continue to engage” with the SEC on the topic.

Jun. 30, 2020 The Department of Labor’s Employment Benefits Security Administration (EBSA) proposes amendments to the “Investment Duties” regulation titled “Financial Factors in Selecting Plan Investments” that would make it more difficult for Employee Retirement Income Security Act of 1974 (ERISA) fiduciaries to invest in ESG-related funds.

Nov. 1, 2020 The Federal Reserve’s Financial Stability Report includes climate change for the first time in a section titled “The Implications of Climate Change for Financial Stability.”

Nov. 4, 2020 The SEC publishes a final rule that amends procedural requirements, as well as a provision relating to resubmitted proposals under the shareholder-proposal rule, Rule 14a-8, which protects a shareholder’s rights to exercise governance rights, such as electing board directors, via proxy voting. The rule protects shareholders’ proxy voting rights by requiring certain companies to include shareholder proposals in their proxy statements. The new rule raises the threshold for re-submitting a proposal, among other changes.

Nov. 9, 2020 The Fed discusses climate change and microprudential risks in the November 2020 Supervision and Regulation Report. The Fed points to chronic flooding, wildfires, severe weather, and energy transitions as potential risks, and recommends adapting governance and disclosures to better account for climate-related risks.

Nov. 13, 2020 The EBSA’s final rule on Financial Factors in Selecting Plan Investments cautioned against considering ESG factors in ERISA-covered plan investments, emphasizing financial outcomes over other considerations, and restricted fiduciaries from offering ESG-themed funds as default options.

Dec. 1, 2020 The SEC Asset Management Advisory Committee releases Potential Recommendations of the ESG Subcommittee established earlier. The subcommittee recommends that the SEC adopt standards for corporate disclosures of material ESG risks consistent with other financial disclosure requirements. The draft recommendations also preliminarily suggest best practices to enhance ESG investment product disclosure, such as clear descriptions of each product’s strategy and investment priorities and non-financial objectives.

Dec. 16, 2020 The EBSA amends the “Investment Duties” regulation for proxy voting and exercising shareholder rights. The regulation clarifies that plan fiduciaries are not required to vote all proxies, but emphasizes that votes they do make should be based on pecuniary factors. The rule lists specific principles a plan fiduciary must consider when deciding whether to exercise shareholder rights, including not using plan assets to further “policy-related or political issues, including ESG issues.”

Jan. 14, 2021 The Office of the Comptroller of the Currency (OCC) finalizes a rule designed to prevent banks from refusing to finance categories of projects or companies, requiring them to undergo individual risk assessments to support their decision to deny services to any particular potential customer.

Jan. 19, 2021 In a hearing before the Senate Finance Committee, Biden’s Treasury Secretary nominee Janet Yellen announces plans to create a new Treasury hub to examine climate-related risks to the financial system, and to appoint a senior-level official to lead climate efforts.

BIDEN ADMINISTRATION
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Jan. 25, 2021 NY Fed announces that Kevin Stiroh will step down to take on a role leading the newly formed Supervision Climate Committee at the Federal Reserve System. The Supervision Climate Committee (SCC) is a system-wide group bringing together senior staff across the Federal Reserve Board and Reserve Banks. The SCC will further build the Federal Reserve’s capacity to understand the potential implications of climate change for financial institutions, infrastructure, and markets.

Feb. 1, 2021 The SEC appoints Satyam Khanna as the agency’s first Climate Policy Advisor for Climate and ESG in the office of Acting Chair Allison Herren Lee. In this new role, Mr. Khanna will advise the agency on environmental, social, and governance matters and advance related new initiatives across its offices and divisions.

Feb. 8, 2021 The Federal Reserve Bank of San Francisco releases a report on climate change as a financial risk that describes “how uncertainty about the magnitude, scope, and timing of the economic damages from climate change translates into financial risk, which can adversely affect financial markets, asset classes, and institutions as well as the income and balance sheets of businesses, households, and governments.”

Feb. 24, 2021 SEC commissioner Allison Lee directs the Division of Corporation Finance to enhance its focus on climate-related disclosure in public company filings, including updating the 2010 guidance and assessing existing compliance.

Feb. 26, 2021 The SEC issues an Investor Alert & Bulletin titled “Environmental, Social and Governance (ESG) Funds – Investor Bulletin” noting recent increases in popularity for ESG funds and providing educational information for investors.

Mar. 3, 2021 The SEC Division of Examinations announces its 2021 Examination Priorities, highlighting plans to integrate climate and ESG considerations into the agency‘s broader regulatory framework. The division hopes to align voting with investors’ best interests and firms’ business continuity plans mitigating climate risk by examining proxy voting policies.

Mar. 4, 2021 The SEC Division of Enforcement announces the creation of the Climate and ESG Task Force to develop initiatives to proactively identify ESG-related misconduct. To identify potential violations, the task force will evaluate and pursue tips, referrals, and whistleblower complaints, as well as provide expertise and coordinate the effective use of Division resources. The initial focus will be to identify any material gaps or misstatements in issuers’ disclosure of climate risks under existing rules.

Mar. 10, 2021 The US Department of Labor releases a statement on enforcement of its final rule on Financial Factors in Selecting Plan Investments and Fiduciary Duties Regarding Proxy Voting and Shareholder Rights, announcing that it will not enforce the rules’ disincentivization of ESG investing.

Mar. 15, 2021 The SEC requests comments to help assess the materiality of climate-related disclosures as well as the costs and benefits of different regulatory approaches to climate disclosure.

Mar. 17, 2021 The Commodity Futures Trading Commission announces the creation of the Climate Risk Unit (CRU). The purpose of the CRU is to support the CFTC’s mission by focusing on the role of derivatives in assessing climate-related risk and facilitating a transition to a low-carbon economy. Additionally, the CRU intends to accelerate engagement with market-based climate initiatives in the larger ESG space.

Mar. 19, 2021 The SEC’s Asset Management Advisory Committee, in an official meeting, discusses potential recommendations on ESG reporting.

Mar. 22, 2021 The SEC launches a new page on its website to consolidate information and materials regarding agency actions on climate and ESG investing. The agency created the new page on the front of their website in response to investor demands for this information.

Mar. 23, 2021 Lael Brainard, a governor of the Fed, announces the creation of the Financial Stability Climate Committee (FSCC) in a speech at a Ceres conference. The FSCC is a systemwide committee charged with developing and implementing a program to assess and address climate-related financial risks, and to complement the work of the SCC in this area.

Mar. 26, 2021 Congressional Review Act disapproves of Nov. 2020 rule revising requirements and resubmission thresholds for Rule 14a-8.

Apr. 9, 2021 The SEC’s Division of Examinations issues a Risk Alert that notes the risk presented by lack of standardization in the rapidly growing field of ESG products. In its examinations of investment advisers, funds, and effective practices, the division has observed deficiencies and internal control weaknesses that should be addressed.

Apr. 14, 2021 The Senate confirms President Biden’s SEC Chair nominee, Gary Gensler, who spoke about climate risk and the importance of climate-related financial disclosures during his hearing.

Apr. 19, 2021 The Department of Treasury announced a coordinated climate policy strategy focused on three prongs: climate transition finance, climate-related economic and tax policy, and climate-related financial risks. To implement this strategy, Treasury created a Climate Hub and appointed a Climate Counselor to coordinate these efforts.

May 20, 2021 President Biden issues Executive Order 14030 requesting a Climate-Related Financial Risk Strategy, an Assessment of Climate-Related Financial Risk by Financial Regulators, and directing the Department of Labor to consider proposing a rule to suspend, revise, or rescind two rules. These rules are the “Financial Factors in Selecting Plan Investments” and “Fiduciary Duties Regarding Proxy Voting and Shareholder Rights” which the agency had earlier decided not to enforce.

Jul. 28, 2021 SEC chair Gary Gensler reveals that he’s directed SEC staff to consider necessary information and metrics for investors to comprehend climate-related investment risks. At a virtual event hosted by a UN-backed investor group, Gensler revealed that the SEC is working to finalize climate disclosure requirement regulations.

Aug. 31, 2021 The Treasury’s Federal Insurance Office issues a Request for Information in response to the May 20 executive order on Climate-Related Financial Risk. The office seeks comments on best methods for monitoring and assessing the climate-related risks to the insurance and financial sectors. Additionally, the office seeks input on three climate-related insurance priorities: supervision and regulation, market resilience and mitigation, and sector engagement.

Sep. 22, 2021 The SEC’s Division of Corporate Finance releases a guidance document focused on climate-related disclosure under existing rules and standards. The guidance documents include a sample letter demonstrating how the agency may communicate with companies on disclosure requirements, as well as some clarifying points and additional questions.

Sept. 2021 Researchers at the New York Federal Reserve Bank develop a stress testing procedure to measure financial institutions’ resilience to climate-related risks. The procedure, titled Staff Report Number 977, introduces a measure of systemic climate risk called CRISK that quantifies institutions’ expected capital shortfall in a climate stress scenario. The Federal Reserve Bank also applies CRISK to study large global banks’ climate-related risk exposure in response to falling fossil-fuel prices in 2020.

Oct. 14, 2021 The Department of Labor’s Employee Benefits Security Administration releases its proposed rule, “Prudence and Loyalty in Selecting Plan Investments and Exercising Shareholder Rights,” amending the Investment Duties regulation under ERISA. It clarifies how ERISA fiduciaries can consider climate change and ESG in their investment decisions. This rule responds to changes made by EBSA to these regulations in 2020 that were seen as hostile to ESG factors.

Oct. 21, 2021 In response to Biden’s E.O. 14030 on climate-related financial risk, the Financial Stability Oversight Council, chaired by the secretary of the Treasury, publishes a report stating that climate change is a threat to financial markets. The report comes with recommendations for member agencies to assess climate-related risks, build capacity and expertise, and enhance climate-related disclosures and data.

Nov. 3, 2021 The SEC’s Division of Corporate Finance issues a staff legal bulletin on shareholder proposals, and rescinds three prior bulletins via Rule 14a-8. The bulletin outlines the Division’s position on the Rule 14a-8 exceptions for ordinary business and economic exception and republishes with technical changes and guidance on the use of email for official submissions and communications. Rule 14a-8 provides a means by which shareholders can present proposals for consideration in a company’s proxy statement, a cornerstone of shareholder engagement on important matters.

Dec. 6, 2021 Correspondence between the SEC and Honda reflects a growing trend of SEC comment letters to filing companies asking for additional disclosure related to climate change-related risks and in some cases asking companies to justify claims that certain information is immaterial to investors. Companies receiving comment letters related to climate risk disclosure include Honda, Phillips, Amazon, Comcast, and Target and more.

Mar. 21, 2022 The SEC proposes a new rule with requirements for publicly traded companies to disclose climate-related information in registration statements and periodic reports, including information regarding climate risks (such as how extreme weather and energy transitions might affect their business), and certain climate-related financial statement metrics. The regulation would also require registrants in certain cases to disclose direct greenhouse gas emissions associated with their customers and suppliers, as well as emissions associated with purchased electricity. Additionally, the proposal would require companies that advertise emissions reduction goals to detail how they plan to achieve these goals, their reliance on carbon offsets, and their progress so far.

April 5, 2022 The Federal Deposit Insurance Corporation (FDIC) requests comment on draft principles to provide a framework for managing climate-related financial risks for banks with over $100 billion in consolidated assets.

Apr. 1, 2022 Republican representatives introduce a bill into the House of Representatives that would prevent the SEC from enforcing mandatory climate disclosures. The bill would prevent the SEC from requiring disclosure related to GHG emissions.

Apr. 4, 2022 The Office of Management and Budget releases a report on the federal budget’s exposure to climate risk. The report highlights six climate-related financial risks that could reduce federal revenue annually by up to 7.1 percent: disaster relief, flood insurance, crop insurance, healthcare expenditures, wildland fire suppression spending, and flood risk at Federal facilities.

Apr. 8, 2022 The National Association of Insurance Commissioners approves new climate-change related risk disclosure requirements for a number of state insurance regulators.

Apr. 28, 2022 The SEC announces a lawsuit against a company for making false and misleading claims about the safety of a mine ahead of its deadly collapse in 2019. It is one of the commission’s first enforcement actions related to ESG since the launch of its Climate and ESG Task Force. According to the SEC, the company misled investors and others, including through its environment, social and governance (ESG) disclosures. Gurbir Grewal, Director of the SEC’s Division of Enforcement, states: “By allegedly manipulating those [ESG] disclosures, [company] compounded the social and environmental harm caused by the […] dam’s tragic collapse and undermined investors’ ability to evaluate the risks posed by [company’s] securities.”

May 9, 2022 The SEC announces an extension of the comment period for the proposed climate risk disclosure rule to June 17 given the high level of interest in the rule. Chair Gensler states that, “The SEC benefits greatly from hearing from the public on proposed regulatory changes. […] I’m pleased that the public will have additional time to provide thoughtful feedback.”

May 16, 2022 The Supreme Court will hear a case from the Fifth Circuit regarding whether a federal district court has jurisdiction to hear a suit when the respondent is involved in an ongoing SEC administrative proceeding when the petitioner seeks to enjoin that administrative process due to an alleged constitutional defect in the statutory authority of administrative law judge removal. The SEC’s petition states that until the Fifth Circuit’s decision allowing this lawsuit to move forward before the conclusion of the administrative process, courts of appeals had held that parties could not bypass the statutory review scheme by suing in district court to enjoin an ongoing administrative proceeding. The Court will hear a case, Axon Enterprise, Inc. v. Federal Trade Commission, that deals with the same question with respect to Federal Trade Commission administrative proceedings. The SEC and FTC statutory review schemes are “materially identical,” so the SEC has asked that this petition be held until that decision is made. Securities and Exchange Commission, et al. v. Michelle Cochran (S. Ct. Docket No. 19-10396).

May 18, 2022 The Fifth Circuit Court of Appeals rules that the SEC’s use of in-house administrative law judges is unconstitutional, holding that (1) the use of in-house SEC judges violates the petitioners’ Seventh Amendment right to a jury trial, (2) the delegated legislative authority does not “provide an intelligible principle by which the SEC would exercise the delegated power,” (3) the removal process for in-house judges violates the Article II Take Care Clause. Jarkesy v. SEC, 5th Cir., No. 20-61007.

May 23, 2022 The SEC charges an investment management firm for “misstatements and omissions” about environmental, social and governance (ESG) factors in investment decisions for some of the mutual funds it managed. Adam Aderton, Co-Chief of the SEC Enforcement Division’s Asset Management Unit and a member of the Climate and ESG Task Force, states: “As this action illustrates, the Commission will hold investment advisers accountable when they do not accurately describe their incorporation of ESG factors into their investment selection process.”

May 25, 2022 The SEC announces proposed amendments to rules and reporting forms to facilitate “consistent, comparable, and reliable information” for investors about environment, social, and governance (ESG) strategies. Under the proposed amendments, funds claiming ESG impacts would need to provide more information to show their approach and impact. For example, funds with a focus on environmental impact would need to disclose the greenhouse gas emissions of the portfolio investments.  The proposing release will be published in the Federal Register and open for comment for 60 days.

May 25, 2022 On the same day, the SEC announces proposed amendments to Rule 35d-1 under the Investment Company Act of 1940, the fund “Names Rule,” to enhance transparency and avoid misleading investors. The SEC would update the 80 percent investment policy requirement, which requires funds with certain names to invest 80 percent of their assets in investments reflected in the fund name, to include funds with particular characteristics, including ESG investments. The proposed changes would not permit funds that consider ESG as one of many non-determinative factors to use ESG or similar terminology in their name, and doing so could be considered materially deceptive or misleading. The proposing release will be published in the Federal Register and open for comment for 60 days.

May 31, 2022 The Governmental Accounting Standards Board issues guidance to states and cities on the Intersection of Environmental, Social, and Governance Matters with Governmental Accounting Standards. The guidance reviews existing accounting standards that intersect with ESG issues to help government accountants think about how to address and report on ESG-related questions.

May – June 2022 The SEC sends letters to at least six companies questioning the “more expansive disclosure” on ESG issues that the company included in their corporate sustainability report than their 10-Ks. The SEC asks the companies whether they considered providing the same type of climate-related disclosure in both reports.

June 2, 2022 The CFTC unanimously votes to release a Request for Information for public comment on climate-related financial risk with respect to the derivative market and the underlying commodities market. The CFTC states that information received will help the agency “promote responsible innovation, ensure the financial integrity of all transactions subject to the Commodity Exchange Act, and avoid systemic risk.” Comments are due by August 8, 2022.

June 2, 2022 The CFTC hosts a Voluntary Carbon Convening to discuss supply and demand for high quality carbon offsets, including data and standardization issues. At the convening, Chair Rostin Behnam applauded the “strength of public-private partnerships aimed at determining how the derivatives markets can facilitate the transition to a net-zero economy.”

June 10, 2022 The Federal Reserve issues a paper finding that the premium that investors pay for green bonds – a $500 billion market globally – is not linked to the credibility or impact of the project they support. The authors explain that, “The empirical evidence suggests that a greenium exists, but it primarily favors large, rated European firms, does not necessarily reward high-quality green projects, and is small or potentially negative when taken net of fees and compliance costs. The borrowing cost advantage of green corporate bonds likely plays a limited role in incentivizing global, large-scale climate investment.”

June 15, 2022 The Basel Committee on Banking Supervision, in which the US participates, proposes a global approach for how banks should manage climate-related financial risk. The Committee releases 18 principles for effective management and supervision of climate risks, addressing corporate governance, internal controls, risk assessment, management and reporting. 

June 16, 2022 Jaime Lizárraga and Mark Uyeda were confirmed by the Senate to serve as Securities and Exchange Commissioners. They will fill the open Democratic and Republican seats on the Commission respectively.

June 30, 2022 The Treasury Department’s Federal Insurance Office is seeking better information about property insurance availability in disaster prone areas as well as the financial risk that climate chan ge poses to the insurance industry. The office seeks to understand “the impact [of climate change] on protection gaps and insurance availability, particularly in at-risk markets,” according to the email obtained by E&E News. 

July 28, 2022 Treasury’s Office of Financial Research unveils its new Climate Data and Analytics Hub pilot, a tool designed to help financial regulators assess climate-related financial risks. During the pilot phase, the Federal Reserve Board of Governors and the Federal Reserve Bank of New York will have access to the tool, with the goal of providing wider access in the future. 

Sept. 21, 2022 The SEC Investor Advisory Committee endorses the SEC’s proposed climate risk disclosure rule and specifically its proposal to require companies to disclose greenhouse gas emissions, including Scope 3 emissions from indirect sources such as supply chains. The Committee provides non-binding recommendations to the Commission on a range of regulatory and other investor matters.

Sept. 29, 2022 The Federal Reserve announces that six of the largest US banks will participate in a pilot climate scenario analysis exercise to assess climate-related risks. The pilot, designed to improve firms’ ability to measure and manage climate risks, will launch in early 2023.

Oct. 3, 2022 The Financial Stability Oversight Council, part of the U.S. Department of the Treasury, establishes the Climate-related Financial Risk Advisory Committee (CFRAC), which is intended to further the goals of “identifying, assessing, and responding to the risks climate change poses to the financial system.” 

Oct. 6, 2022 The Employee Benefits Security Administration, part of the Department of Labor, submits to the White House Office of Information and Regulatory Affairs (OIRA) a draft final rule that would relax Trump-era restraints on ESG retirement investing. The rule would allow retirement plan managers to consider ESG factors in making investment decisions. 

Oct. 18, 2022: The SEC reopens the comment file for the proposed climate risk disclosure, ESG funds, and fund names rules, along with other proposed rules, due to a technical issue that prevented the commission from receiving some comments during the comment periods. Comments will be open until Nov. 1, 2022.

Oct. 19, 2022 Nineteen state attorneys general subpoena six major American banks for documents regarding their involvement with the Net Zero Banking Alliance, a consortium of financial institutions convened by the United Nations to further net-zero goals. 

Oct. 19, 2022 The Treasury’s Federal Insurance Office (FIO) announces plans to request information from property & casualty (P&C) insurers regarding their underwriting data on homeowners’ insurance. The FIO intends for the information to aid its “assessment of climate-related exposures and their effects on insurance availability.”

Nov. 2, 2022 The SEC adopts a final rule requiring mutual funds and other investment funds to provide more information about the proxy votes they cast on ESG and other issues. The rule directs fund managers to group each proxy vote they cast within a subject-matter category such as “Environment or climate” or “Corporate governance,” among other measures aimed at increasing investor access to information about proxy voting behavior.   

Nov. 7, 2022 The Supreme Court of the United States hears two cases, Axon Enterprise, Inc. v. Federal Trade Commission and Securities and Exchange Commission v. Cochran, concerning whether a party subject to an administrative proceeding may challenge the proceeding’s constitutionality in federal court while it remains ongoing. The decisions in the cases could affect how federal agencies, including the SEC, conduct administrative proceedings in the future.

Nov. 14, 2022 Three federal agencies, including the Department of Defense, propose a rule that would require major federal government contractors and suppliers to publicly disclose their greenhouse gas emissions and climate-related risks and set emissions-reduction targets. The comment period will remain open until January 13, 2023.

Nov. 22, 2022 The Department of Labor releases a final rule allowing 401(k) managers to consider ESG factors in making investment decisions, providing for the rule to take effect on Jan. 30, 2023.

Dec. 5, 2022 The Federal Reserve releases draft principles for a high-level framework for management of climate-related financial risk for financial institutions with over $100 billion in assets. The proposed guidance is “substantially similar” to guidance released by OCC and FDIC. Commenters will have 60 days to submit comments once it is published in the Federal Register.

Dec. 14, 2022 The Federal Trade Commission (FTC) votes to start a regulatory review of its Green Guides, which are designed to help companies avoid making misleading or deceptive environmental claims. The FTC is seeking public comment as part of the review.

Jan. 17, 2023 The Federal Reserve releases its first climate scenario exercise for the six largest US banks. The banks will explore the physical risks and transition risks from a large hurricane event in the Northeastern US.

Dec. 21, 2022 The New York Department of Financial Services releases a proposed rule to govern how banks and insurers “identify, measure, monitor, and control climate-related financial risks.” 

Jan. 26, 2022 25 states with Republican attorneys general sue the U.S. Department of Labor in U.S. District Court, seeking an injunction to block a rule scheduled to go into effect on Jan. 30, 2023, to allow 401(k) managers to consider ESG factors in making investment decisions. 

March 7, 2023: Treasury Secretary Janet Yellen delivers opening remarks at the first meeting of the Climate-related Financial Risk Advisory Committee (CFRAC), emphasizing that “taking climate change into account is prudent risk management.” The CFRAC, established in October, 2022, as an external advisory committee to the Treasury Department’s Financial Stability Oversight Council (FSOC), is tasked with advising the FSOC on climate-related risks to the financial system.  

March 29, 2023 The SEC announces a $55.9 million agreement with a Brazilian mining company to settle charges related to false statements that the company had made in its sustainability reports about the safety of its dams prior to a 2019 dam collapse.

June 27, 2023 The Federal Insurance Office releases a report assessing climate-related risk in the insurance industry. The report assesses climate-related challenges in supervision and regulation of insurers and makes a series of recommendations for strengthening state oversight, improving climate risk-related tools, and more.

Sep. 14, 2023 California’s legislature passes two climate disclosure bills. The Climate Corporate Data Accountability Act (SB-253) would require companies that do business in California with total annual revenues over $1 billion to disclose their scope 1, 2, and 3 emissions. The Greenhouse Gases: Climate-Related Financial Risk Act (SB-261) would require companies that do business in California with total annual revenues over $500 million to disclose their climate-related financial risk. The bills are now before Gov. Newsom to sign or veto.  

Sept. 19, 2023 Treasury releases Principles for Net-Zero Financing & Investment, a document designed to promote consistency and credibility and encourage greater adoption of best practices related to financial institutions’ net zero commitments, with a focus on Scope 3 emissions.

Sept. 20, 2023 The SEC adopts amendments to the Investment Company Act “Names Rule” that will require fund names to more accurately reflect their portfolio. Specifically, the changes will require more funds with names that suggest particular areas of focus, including Environmental, Social, or Governance factors, to follow the 80 percent investment policy, which requires those funds to invest at least 80 percent of fund value in the specified area of investment focus.

Oct. 4, 2023 The New York Stock Exchange (NYSE) files a notice with the SEC proposing to amend the NYSE Listed Company Manual to adopt a new listing standard Natural Asset Companies (NACs). NACs are a new class of corporations that hold the rights to the ecological performance produced by natural or working areas, such as large-scale farmlands, and have the authority to manage the areas for conservation, restoration, or sustainable management. The SEC has 90 days either to issue an order approving or disapproving of the rule change or to begin proceedings to determine whether to disapprove of the change.

Dec. 4, 2023 The CFTC released proposed guidance for voluntary carbon credit derivative contract trading intended to outline factors that may provide greater transparency in the carbon credit market. 

Jan. 30, 2024: A lawsuit was filed challenging two new California climate disclosure and financial reporting laws for requiring disclosure by qualifying public and privately-held businesses of GHG emissions and climate-related risks throughout their value chain. The plaintiffs allege SB 253 and 261 violate constitutional rights by compelling companies to engage in nonfactual, costly speech on climate change. They seek to enjoin the California Air Resources Board from taking any action to enforce the two laws.

March 6, 2024 The SEC narrowly voted to release its long-awaited final climate-related risk disclosure rule, which requires public companies to report on material climate-related risks that affect to the business and, for some large companies, greenhouse gas emissions, if material. The rule will be effective 60 days after publication in the Federal Register. A number of lawsuits were filed by states, industry, and environmental groups following the release of the final rule. You can read our analysis here.

March 15, 2024 The Fifth Circuit granted an administrative stay putting the rule on hold at the request of energy companies. Liberty Energy v. SEC, Docket No. 24-60109 (5th Cir.).

March 21, 2024 The Judicial Panel on Multidistrict Litigation selected the Eighth Circuit via lottery to hear a case consolidating nine circuit court challenges to the SEC’s climate-related risk disclosure rule. Iowa v. SEC, Case No. 24-01522 (8th Cir.).

April 4, 2024 After an onslaught of litigation challenging the rules, the SEC issued an administrative stay of the final rules pending judicial review of the consolidated Eighth Circuit petitions.

May 9, 2024 The Federal Reserve released the results of the first Climate Scenario Analysis conducted by the six biggest investment banks.

June 21, 2024 Petitioners submitted their briefs in the consolidated challenge to the SEC’s climate risk disclosure rule in the Eighth Circuit, including state petitioners, Chamber of Commerce and other industry petitioners, and energy producers. Iowa v. SEC, Case No. 24-01522 (8th Cir.).

June 24, 2024 Amici submitted their briefs in support of petitioners in the consolidated challenge to the SEC’s climate risk disclosure rule in the Eighth Circuit. Iowa v. SEC, Case No. 24-01522 (8th Cir.).