Investor<\/a> demands may not be immediate, Littenberg said, but they still could press companies in the future.<\/p>\n\u201cI think over time, we will see some investors pushing harder for the information that they want because some of the investors do want Scope 3 information. [Even though] that\u2019s not part of these rules, and potentially other compliance requirements\u2026investors may very well wind up asking for those disclosures or other disclosures that they want as well,\u201d Littenberg said.<\/p>\n
\u201cI don\u2019t think investors are going to feel constrained by the SEC Rule, but with the delay in the rule or even potentially the rule getting overturned, I think we are going to see some institutional investors being more proactive in their requests for climate related disclosures,\u201d he added.<\/p>\n
Importantly, the stay from the SEC includes a stipulation that ensures prior work is not erased.<\/p>\n
\u201cThe stay issued by this order is limited to the final rules that have been challenged in the consolidated Eighth Circuit petitions. It does not stay any other commission rules or guidance,\u201d it reads.<\/p>\n
That note primarily alludes to the SEC\u2019s climate guidance from 2010, which requires companies to disclose material climate-related matters. Hupart said that means companies won\u2019t be able to regress, even as the new disclosure requirements remain pending.<\/p>\n
\u201cThis stay only applies to the rules the SEC issued in 2024. The SEC had previously issued guidance on climate issues back in 2010, and that is expressly excluded from the stay,\u201d Hupart told Sourcing Journal.\u00a0\u201cSo, to the extent a company determined that it needed to report something to the SEC based on the 2010 climate guidance, that obligation remains in effect.\u201d<\/p>\n
Primarily, the stay helps to streamline the early pieces of the pending litigation. Several of the petitioners had filed motions to stay the final rules in the Eighth Circuit, where the consolidated arguments will be heard.<\/p>\n
That was because, on the day after the Eighth Circuit had been selected to hear the case, the Fifth Circuit, which issued an initial administrative stay in response to a petition from Liberty Energy, dissolved its stay.<\/p>\n
Instead of waiting for the new court to issue a second stay, the SEC took the action itself.<\/p>\n
\u201cAll of the various motions for stay would act to delay the consideration of the merits, because there would be side issues in terms of the extent [and] the scope of the delay of the SEC reporting rule, and all of that back and forth could have consumed time, resources and ultimately delayed a resolution on the merits,\u201d Hupart said. \u201cNow all the back and forth about preliminaries is no longer of issue.\u201d<\/p>\n
The SEC noted the importance of focusing on the merits of the rules in its order to stay and also put a lid on a question some companies may have wanted answers to: What happens if the rules go into effect while their legality is pending?<\/p>\n
\u201cA stay avoids potential regulatory uncertainty if registrants were to become subject to the final rules\u2019 requirements during the pendency of the challenges to their validity,\u201d the order noted.<\/p>\n
Littenberg said he believes the SEC should delay the enforcement of the rules, whether or not they need to be altered based on the court\u2019s decision.<\/p>\n
\u201cIt\u2019s my hope and expectation that the SEC will push the timetable out. I don\u2019t think it\u2019s reasonable to expect that companies are going to do meaningful work toward compliance with the rule while there\u2019s a stay in place, and I hope that the SEC recognizes that,\u201d he said.<\/p>\n
Nonetheless, affected companies will need to remain agile as the litigation proceeds to make well-informed decisions on what to track for potential future reporting, he added.<\/p>\n
\u201cI don\u2019t think companies will have the luxury of not following the proceedings. They will have to make decisions at different points as to whether or not they start to address compliance with rules in earnest,\u201d Littenberg said. \u201cAs we move through the litigation, as we get past the election, I think companies will have more of an informed view than they\u2019ll have at this point, but I don\u2019t think that this is one where companies can just forget about it until the final decision comes down.\u201d<\/p>\n\n
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