SEC’s Climate Disclosure Rule Is Surviving Challenges…For Now

Propmodo Daily

Greetings!

With the SEC's new climate disclosure rules facing legal and congressional challenges over concerns about costs and regulatory overreach, should businesses still prepare for compliance? Plus, Compass Datacenters’ redevelopment of the former Sears HQ office campus in suburban Chicago could provide a roadmap for more office-to-data center conversion projects.

Now let’s dig in!

Sec’s Climate Disclosure Rule Is Surviving Challenges…for Now

The Securities and Exchange Commission (SEC) adopted final rules on March 6th, requiring public companies to disclose risks and impacts related to climate change. Real estate firms have been preparing for these landmark rules for some time. While the regulations aren't necessarily welcome, there has been appreciation for the clarity on what’s required.

The question of whether the SEC’s climate rules will survive a flurry of congressional and legal challenges has muddied the waters. On April 4th, the SEC stayed the regulations to “facilitate the orderly judicial resolution” of pending legal challenges. This primarily refers to the legal battle in the U.S. Eighth Circuit Court of Appeals, where the agency is defending against consolidated cases from Republican-led states, the oil industry, and some pro-business groups.

Congressional Republicans are vigorously contesting the climate disclosure rules, driven by concerns that the regulations could impose significant burdens on businesses, particularly in real estate and energy. They argue the rules could increase costs, stifle economic growth, and overstep the SEC's traditional mandate of protecting investors. Despite their efforts, including unsuccessful Congressional Review Act challenges, they have not yet succeeded in overturning the rules.

Although the threat of the Congressional Review Act has passed, House Republicans are now targeting the SEC’s rule through the appropriations process. In June, the House Appropriations Committee advanced a fiscal year 2025 bill that would prohibit the agency from using any funding to enact, implement, or enforce the regulation. The bill would also require the SEC to report on “the extent and limits of its authority in the implementation” of the rule.

The SEC’s climate disclosure rule is highly controversial, so the legal and congressional fights aren’t surprising. The regulation will significantly impact many commercial real estate firms that are closely monitoring the challenges. While the future of the rules is uncertain, it’s probably wise to continue preparing for compliance as usual.

Insider Insights

Getting behind wood
A group called the Softwood Lumber Board has been lobbying cities to change their regulations around mass timber construction and is now accepting applications from cities for investments of between $100,000 and $250,000 each to help them launch mass timber accelerator programs.

Out of the frying pan
Investors in Canada and elsewhere are finding themselves in a Catch-22 where their rent does not cover their mortgage costs but they fear selling their properties because they would have to sell lower than its purchase price.

Spotlight

Compass Datacenters is transforming the former Sears headquarters near Chicago into a major data center complex, reflecting a growing trend of repurposing outdated corporate sites. This project, driven by AI demand, combines sustainability with innovation and could serve as a model for developers facing land shortages in the booming data center industry.

Headlines

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Overheard

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Propmodo Daily is written and edited by Franco Faraudo with contributions from readers like you and the Propmodo team.

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