In a sign that some of the aggressive Republican pushback is working, the Securities and Exchange Commission (SEC) is considering easing a proposed rule that would compel companies to disclose climate-related risks. The Wall Street Journal reported recently that the SEC is reconsidering just how stringent the reporting requirement will be. The final version of the rule is still expected to require climate disclosures from companies, although the SEC might raise the threshold for reporting.

The rule was first proposed in March and it says companies must report direct and indirect greenhouse gas emissions and the reports must be audited by an outside party. Attorneys general from 25 states filed a lawsuit against the Administration last month over the plan to allow retirement fund managers to consider ESG. The lawsuit, filed in Texas federal court, sought a preliminary injunction to stop the rule from going into effect. Gov. Ron DeSantis (R-FL) additionally approved a measure prohibiting state-run fund managers in Florida from considering environmental, social, and governance standards (ESG) factors when making investments.

The proposed rule fits President Biden’s broader climate agenda, including cutting greenhouse gas emissions by more than half by the end of the decade, when compared to 2005 levels. The Department of Labor already has a rule that would allow retirement plan managers to weigh ESG when making investments. This is contrary to and a reversal of Trump-era rules restricting such considerations on the grounds that they don’t prioritize investor returns.

In June, EMA submitted comments on the SEC’s proposed rule that would mandate extensive climate disclosures by public companies. While most energy marketers represented by EMA are not public companies and, therefore, are not required to report directly to the SEC, EMA is concerned due to the costs and burdens their SEC-regulated suppliers would incur by being required to disclose greenhouse gas emissions from upstream and downstream activities in its value or supply chain under many, if not most, circumstances.

For public companies that sell motor fuels and heating fuels to be compliant with the Proposed Rule, if finalized, they would need to track and disclose data derived from downstream customers, including energy marketers’ individual and day-to-day operations. Unlike the large corporations regulated by the SEC, energy marketers, as small businesses, do not have, and cannot afford, compliance officers or attorneys dedicated solely to SEC compliance activities. This could force energy marketers of all sizes, but especially those with smaller-sized operations, to report data they may be unable to provide, which would result in a costly, additional expense or possibly the loss of business from the inability to report data to their suppliers or customers. EMA also cited privacy and potential liability concerns with the proposed rule.

The other good news is that the 6-3 conservative majority of the Supreme Court of the United States (SCOTUS) is likely to weigh in at some point once the rule is finalized and challenged by concerned parties including EMA.

Click here to read EMA’s comments on the proposed rule.