On March 6, the U.S. Securities and Exchange Commission (SEC) voted 3-2 to approve much-anticipated climate disclosure rules. In the final rules, many of the most ambitious greenhouse gas emission disclosure requirements were rolled back from the original proposed rules published in March 2022.

“The new rule, unfortunately, does little to prevent companies from making vague, untested and, most significantly, unsubstantiated, statements about their carbon footprints,” says former SEC Commissioner Allison Herren Lee, now Of Counsel at the whistleblower firm Kohn, Kohn & Colapinto. “It paves the way for greenwashing which, in capital markets, is just shorthand for a very bad outcome: mispriced risk and misallocation of capital.”

“Under the new rule companies will not have to disclose the bulk (or in some cases any) of their GHG emissions,” explained Lee. “Investor focus on this information remains strong and is only growing, so companies will continue to exploit this interest.”

Lee served as SEC Commissioner from July 2019 until her term expired in July 2022. From January 21, 2021, to April 17, 2021 she also served as Acting Chair of the SEC. During her tenure at the Commission, Lee helped propel ESG issues, including climate-risk disclosures, to the forefront of the agency’s agenda.

In March 2023, Lee joined Kohn, Kohn & Colapinto as Of Counsel. Her practice focuses on representing whistleblowers reporting securities, commodities, banking and capital markets law violations, including a focus on ESG, governance/audit, securities law, and whistleblowers.

Through the SEC Whistleblower Program, individuals will be able to report violations of the climate disclosure rules as well as other ESG violations.

Geoff Schweller also contributed to this article.