US regulators have at last voted in new climate risk reporting rules but, even as they did, there were threats to challenge them in the courts.

The Securities and Exchange Commission (SEC) voted through by 3-2 the new rules on Wednesday, marking a significant turning point for corporate reporting in the US and bringing the country’s governance closer to changes in the European Union and the UK.

Gary Gensler, SEC chair, says the rule met the “basic bargain” that investors decide what risks they take, based on what Franklin Roosevelt called “complete and truthful disclosure”.

“These final rules build on past requirements by mandating material climate risks disclosures by public companies and in public offerings.

“These rules will provide investors with consistent, comparable and decision-useful information, and issuers with clear reporting requirements.”

The new rules ask US companies to make extensive new disclosure on the “material” risks caused by climate change to strategy, business model and outlook. They must also report on oversight by boards and the role of management in addressing material risks.

The rules are considered watered down from the original proposals. Companies will not be expected to report on scope 3 emissions, unlike other jurisdictions.

The level of materiality for a climate risk has been left to companies to decide. There had been concerns the SEC would set a blanket level.

The new rules were welcome in many quarters. Writing for Forbes, Columbia business professor Shivaram Rajgopal says the rules are “progress”.

Not so welcome

However, the new rules still rankle in some quarters. A group of ten Republican states—among them West Virginia, Georgia, Alabama and Alaska—have filed a petition to stymie the new rules. Patrick Morrisey, west Virginia’s attorney general, told The Hill : “This is a backdoor move to undermine the energy industry.”

Opponents of the rules have long argued the SEC does not have the powers to introduce new reporting rules.

Elsewhere, the US Chambers of Commerce warned that it reserved the right to pursue legal action after earlier raising concerns about the “scope, breadth and legality” of the rule. A statement says: “The Chamber will continue to use all the tools at our disposal, including litigation if necessary, to prevent government overreach and preserve a competitive capital market system.”

The SEC received 24,000 letters of comments during a consultation on climate reporting, making it one of the most high-profile issues the regulator has ever worked on.

The EU has already updated its own reporting requirements through the Corporate Sustainability Reporting Directive, itself an update on reporting rules introduced as early 2014.

In the UK, large companies must comply with reporting requirements of the Taskforce For Climate-related Financial Disclosures, first made public in 2017. However, a working group is currently considering the introduction of new disclosure rules based on those published by the International Sustainability Standards Board last year.

New rules for US companies were contentious, even though many companies had voluntarily begun to report on climate risks. They will continue to be so, but the path is set. US companies will become more transparent on their climate risks.