Climate disclosure requirements imposed by both the Securities and Exchange Commission (SEC) and California are being challenged in the courts.

As previously reported by ISPA, California enacted two laws in 2023 that require certain large public and private companies that do business in the state to disclose their greenhouse gas emissions and their climate-related financial risks. A coalition of business groups has challenged these laws in federal court on several grounds. Plaintiffs argue California is preempted by federal law from establishing its own climate disclosure requirements that regulate emissions outside of the state, only Congress has the authority to regulate interstate and foreign commerce and these laws violate plaintiffs’ free speech rights under the First Amendment of the U.S. Constitution by compelling them to engage in subjective speech.

Meanwhile, the California state government might not have enough money to issue regulations needed to implement its climate reporting laws. California has a significant and growing budget deficit, which might force the government to curtail certain activities. It is unclear at the moment whether the budget crisis might delay implementation of these climate reporting laws. Nevertheless, an official with the California Air Resources Board, the California state agency responsible for enforcing these laws, recently stated that the agency expects to receive the funding necessary to implement them.

Likewise, several parties have sued the SEC challenging its final climate reporting rules. As ISPA previously reported, the SEC has taken the unusual step of suspending implementation of its rule until the litigation is resolved.

ISPA will monitor both sets of litigation as they proceed through the courts.