When the SEC announced its mandatory climate disclosure rule on March 6, 2024, this regulation was immediately challenged by parties on both ends of the political spectrum. A number of states, fossil fuel companies, and business groups challenged the rule as improperly imposing regulations on business, and a pair of environmental organizations--the Sierra Club and the Natural Resources Defense Council--objected to the climate disclosure rule as not being rigorous enough. (In particular, these organizations objected to the lack of mandatory Scope 3 disclosures, an element which had been present in the earlier draft rule.) However, on last Friday, May 31, 2024, both environmental organizations withdrew their earlier lawsuits challenging the rule.

Each environmental organization offered a similar reason for dropping the lawsuit. For the NRDC, its motion stated that it had “decided to focus its resources on advocating for improvements to climate-related financial disclosures outside of this litigation.” Similarly, the Sierra Club's filing proclaimed that it “now believe[s] that focusing our resources on advocating for improved investor protections outside of court, while also supporting efforts to defend the SEC's fundamental authority to require disclosure of climate-based risks, is the most effective way” to proceed. Notably, both filings also took note of the recent intervention by a number of state attorneys-general in favor of the SEC's climate disclosure rule--a development that may have encouraged these environmental organizations to drop their objection, as the SEC will now have support from a number of liberal states in the ongoing challenge at the Eighth Circuit.

However, although this development is certainly noteworthy, it does not truly change the fundamental nature of the ongoing legal challenge to the SEC's mandatory climate disclosure rule. The climate disclosure rule is still being challenged in the courts--the withdrawal of the challenge by the environmental groups does not impact the pending challenge by conservative states and organizations, nor the liberal states that have intervened to defend the law. And the rule remains stayed while the legal challenge is pending. Ultimately, the courts, and likely the U.S. Supreme Court, will determine whether the SEC's mandatory climate disclosure law will be enacted and enforced.