On Wednesday, Gov. Kim Reynolds issued a news release praising Attorney General Brenna Bird’s work to overturn Biden administration rules that would inform the public about the amount of greenhouse gases being produced by large corporations. Reynolds called President Biden “a radical climate alarmist” because the Securities and Exchange Commission issued new rules last month requiring the country’s largest corporations to include some information about the pollution they generate that contributes to climate change, as part of the disclosures they must provide to investors.
“The SEC is not a climate regulator, and the Greenhouse Gas Disclosure Rule is not constitutional,” the governor said. “I appreciate Attorney General Bird taking the lead on this lawsuit, taking Biden to court yet again. It has become increasingly clear that the Biden Administration wants to destroy America’s energy independence, trounce on the sovereign rights of states, and cripple the livelihoods of American workers.”
Since its creation in the 1930s, the SEC has required publicly traded companies to file annual reports that contain information important to current and potential investors. The reports are publicly available.
“Our federal securities laws lay out a basic bargain. Investors get to decide which risks they want to take so long as companies raising money from the public make what President Franklin Roosevelt called ‘complete and truthful disclosure,’” SEC Chair Gary Gensler said when the new greenhouse gasses rules were published on March 6. “Over the last 90 years, the SEC has updated, from time to time, the disclosure requirements underlying that basic bargain and, when necessary, provided guidance with respect to those disclosure requirements.”
According to the SEC, “The final rules reflect the Commission’s efforts to respond to investors’ demand for more consistent, comparable, and reliable information about the financial effects of climate-related risks on a registrant’s operations and how it manages those risks while balancing concerns about mitigating the associated costs of the rules.”
The SEC spent two years working on the rules, conducting hearings and consulting with interested parties. The final rules were scaled back considerably from the original proposals, angering environmental groups who said the commission had diluted the rules too much.
The final rules exempt small and most medium-sized corporations from the new reporting requirements, and reduced the scope of the requirements. Instead of requiring estimates of all greenhouse gases generated in creation of its products, a company only needs to report estimates of the relevant pollution it directly generates and is given latitude in deciding what pollution is significant enough to report. Companies covered by the rules would also have to disclose what risks they face from climate change and related weather events, such as increased flood risk or problems caused by increased average temperatures, and what, if any, measures they are taking to address those problems.
The reporting requirements would not take effect until March 2026.
Two weeks after the SEC published the rules, AG Bird issued a news release announcing she was leading a group suing the SEC over the new rules. Bird was joined by was joined by eight other Republican state attorneys general — from Arkansas, Idaho, Missouri, Montana, Nebraska, North Dakota, South Dakota and Utah — as well as the American Free Enterprise Chamber of Commerce, an organization founded in 2022 by a group of Trump-aligned Republicans that bills itself as an “anti-woke” alternative to the U.S. Chamber of Commerce. Former governor Terry Branstad, who served as Donald Trump’s ambassador to China, is the group’s honorary chairman.
Bird’s lawsuit asks the 8th Circuit Court of Appeals to void the new rules.
“I’m suing because, unlike Biden, I am committed to supporting Iowa’s farmers and businesses and upholding the rule of law,” Bird said in her March 12 news release announcing the lawsuit. The attorney general did not mention the reporting requirements that only apply to large, publicly traded corporations.
The news release called new rules, “the most recent example of Biden going too far to force his radical green scheme.”
In a 2022 speech to the Ceres Investor Network, which focuses on corporate accountability and sustainability issues, SEC Chair Gensler pointed out that the sort of reporting requirements the new rules established are already becoming the norm.
“Climate disclosures are already happening,” he said. “Today, investors are already making investment and voting decisions using information about climate risk. Today, hundreds of companies are already disclosing this information.”
International standards for such reporting were established in 2017 by the Financial Stability Board of the G20. The European Union, Japan, Brazil and the United Kingdom, among others, have introduced climate-risk reporting standards.
“One report found that 70 percent of companies in the Russell 1000 Index published sustainability reports in 2020 using various third-party standards, which include information about climate risks,” Gensler said.
The Russell 1000 Index is a listing of the 1,000 most valuable publicly-traded companies, based on market capitalization.
Gensler also explained the new requirements build on existing ones. The SEC has required companies to include certain environmental information in their annual filings since the 1970s.
Bird and the others joining her were not the first group of Republican state attorneys general to sue the SEC over the rules. The attorney general of West Virginia, joined by nine fellow Republican state attorneys general, filed a lawsuit in the 11th Circuit Court of Appeals the week before Bird filed in the 8th Circuit. Other lawsuits were also filed before Bird’s, and on March 15, the Fifth Circuit Court of Appeals issued a ruling in a lawsuit brought by two Texas-based fracking companies.
The companies argued the SEC lacked the authority to require the greenhouse gas or other climate-risk reporting, and the commission’s attempt to do so violated the companies’ First Amendment rights by “effectively mandating discussions about climate change.” The Fifth Circuit, the country’s most far-right appeals court, issued an emergency stay preventing enforcement of the new reporting rules. The SEC had argued an emergency stay was unnecessary since the rules were not scheduled to go into effect for another two years, more than enough time for a full hearing on a possible injunction.
Under federal rules of procedure when multiple versions of the same challenge to the same law are brought in multiple federal jurisdictions, the cases are consolidated into one federal circuit, with a case filed in that circuit becoming the lead case. Before 1988, cases were always consolidated in whichever circuit the first case was filed — in this instance that would be the 11th Circuit, and the West Virginia-led case would be the lead case. But in 1988, Congress changed the rules, and now a lottery system is used to determine which circuit gets the cases. On March 21, the Eight Circuit was randomly selected to hear the consolidated cases, making Bird’s case the lead case.
“Now, we’re going to teach Biden that not even he is above the law,” Bird said in a statement, after the 8th Circuit was selected as the venue. Thirteen days later, Gov. Reynolds issued her statement on Bird “taking the lead on this lawsuit.”
The April 3 news release was Reynolds’ first public statement on the case.
The EPA already mandates some greenhouse gas reporting, although that data isn’t as readily available to investors and corporate decision-makers as the SEC reports would be. According to the EPA data, greenhouse gas emissions from industry and energy production declined between 1990 and 2020, but greenhouse gas emissions from agriculture increased. During that 30-year period, Iowa produced more greenhouse gases from agriculture than any state except Texas.
