Washington, DC – The United States Court of Appeals for the Fifth Circuit on Friday rejected a lawsuit led by Texas, Louisiana, Utah, and West Virginia aimed at killing the U.S. Securities and Exchange Commission rule guiding climate proposals from shareholders. The New Orleans-based three-judge panel, which includes a Trump-appointee, unanimously voted against the lawsuit and said the states did not provide evidence on how they would be harmed by the rules. Adopted by the SEC in 2022 and set to take effect in July 2024, the rule helps investors by making it easier for them to analyze and compare funds’ sustainability actions.
In response, Unlocking America’s Future Spokesperson Kyle Herrig said the following:
“This ruling reinforces what we already know – attacks against responsible investing are a losing issue in the courts and at the ballot box. Adding transparency into the financial ecosystem is good for investors and the economy, especially when it comes to climate risks, investments, and proposals. Self-serving politicians in Texas and other states with well-coordinated campaigns funded by Big Oil can file lawsuit after lawsuit and waste taxpayer resources, but their efforts lack evidence and will ultimately fail.”
The 5th Circuit’s ruling comes amidst a parallel wave of lawsuits against the SEC’s climate risk disclosure rule, despite deep research showing the value of climate risk disclosures for investors, America’s position on the global stage, and Americans trying to save for retirement.
Investors demand and need consistent, reliable, and comparable disclosures around climate risk and commitments.
- After the SEC released its initial proposal, nearly 200 investment firms, nonprofits, and State Treasurers sent a joint letter reaffirming support for the rule and outlining imperatives for the standard transparency requirements. Table setting that “climate change poses a systemic risk to the economy,” the groups noted they believe the rule will “help companies and investors to understand, price, and manage climate risks and opportunities. These activities are at the core of efficient securities markets and are essential to ensuring a just and thriving economy that works for all people and communities.”
- Global investment firm Franklin Templeton, which oversees more than $1.5 trillion in assets under management, issued its own statement of support following the proposed rule, reinforcing that if “information is the oxygen of financial markets, then the SEC has just provided a welcome blast of fresh air that can revitalise capital allocation for the benefit of all.”
Without the SEC’s climate risk disclosure rule, America will fall behind our international peers and competitors – including China – that have established disclosure requirements.
- In April 2022 Canada introduced mandatory climate disclosures for banks and insurance companies set to take effect in the beginning of 2024.
- In January 2023 the European Union’s Corporate Sustainability Reporting Directive (CSRD) entered into force, establishing new rules to ensure that “investors and other stakeholders have access to the information they need to assess the impact of companies on people and the environment and for investors to assess financial risks and opportunities arising from climate change and other sustainability issues.”
- In an effort to keep up with global competitors ahead of the curb, China announced in February 2024 it would establish requirements for more than 400 companies to publish sustainability reports by 2026.
Efforts to kill the SEC’s rule are part of a broader effort to undermine responsible investing. These attacks endanger the financial well-being of everyday Americans.
- Research has consistently shown that attacks on responsible investing endanger the financial well-being of everyday Americans, especially in the form of higher taxes and lower returns on retirement savings.
- Think tanks have clearly shown how transparency has been the bedrock of America’s financial system, and that the “consequences of climate change are creating new and growing forms of financial risk that investors need to consider when choosing how to prudently allocate capital.”
- Research groups have pointed out that America’s current voluntary disclosure environment is expensive for both issuers and investors, hindering decision-making and effective capital investments.
Americans overwhelmingly and across party lines support the SEC’s transparency requirement on climate, and they agree financial managers should be empowered with this information.
- Two-thirds of voters (80% of Democrats, 65% of Independents, and 55% of Republicans) support the proposed SEC rule, and a majority of Americans support responsible investing.
- More than half of voters, including 52% of Republicans and 63% of Independents, oppose Congress putting limits on these kinds of disclosures.
- A majority of voters agree that financial managers should be allowed to consider environmental factors when making investing decisions.
