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 the business and, for some large companies, greenhouse gas emissions, if material. The rule requires public companies to:

• disclose information about material climate-related risks in SEC filings to elicit comparable, decision-useful information for investors;
• disclose information about the impact of climate-related risks on the company’s strategy, business model, and outlook, if material;
• report on their governance of climate-related risks, risk management, and climate targets and goals; and
• disclose financial information about climate-related risks the company faces, including their costs, expenditures, and losses related to severe weather events.
• A subset of large companies will also be required to disclose their scopes 1 and 2 greenhouse gas emissions, if material.

The final rule is less prescriptive than the proposal resulting in the SEC projecting lower compliance costs. Changes include:

• narrowing the greenhouse gas emissions disclosure requirements by (1) requiring reporting of only scope 1 and 2 emissions for large companies, (2) adding a materiality qualifier, and (3) extending the timelines for when emissions reporting must begin;
• expanding a safe harbor from litigation for transition plans and climate targets and goals; and
• reducing the specificity of reporting requirements for portions of the rule.

As anticipated, litigation has already begun. On March 15, the Fifth Circuit granted an administrative stay putting the rule on hold at the request of energy companies. Legal challenges have also been filed by states, private industry, and environmental groups in multiple courts. On March 21, nine circuit court challenges were consolidated in the Eighth Circuit. Read the complete analysis of the final rule.