A landmark climate disclosure rule adopted by the US Securities and Exchange Commission (SEC) yesterday is already facing mounting legal and legislative challenges. Ten states filed suit yesterday shortly after the rule was finalized. Environmental advocates also say they’re considering challenging the rule.

If implemented, the SEC’s new rule would force large, public companies to disclose risks they face due to climate change and share partial information about their greenhouse gas emissions. It would lead to dramatically more transparency than there’s been in the past, but would still paint an incomplete picture of a company’s environmental footprint since companies would only be mandated to divulge a portion of their emissions.

The final rule is a watered-down version of a proposal the SEC put forth in 2022 that sparked a flood of opposition from industry groups and anti-ESG Republicans. But instead of placating everyone with a weaker rule, the SEC seems to have picked a fight with both Republicans and climate activists.

The coalition of ten states suing the SEC allege that “the final rule exceeds the agency’s statutory authority and otherwise is arbitrary, capricious, an abuse of discretion, and not in accordance with law.” It includes West Virginia, Virginia, Georgia, Alabama, Alaska, Indiana, New Hampshire, Oklahoma, South Carolina, and Wyoming.

Congressional Republicans are also working to overturn the SEC’s new rule, Bloomberg Law reports. Representative Bill Huizenga (R-MI) and Senator Tim Scott (R-SC) aim to use a Congressional Review Act, an oversight tool that allows Congress to overrule federal agency actions.

“Investors should realize this overreach by the SEC will significantly hurt our economy while serving as boon for special interests and far-left activists,” Huizenga said in a statement yesterday.

Many environmental activists, however, are also unhappy with the rule, saying it doesn’t go far enough to address climate-related risks. The most contentious piece is whether companies should have to divulge how much pollution they cause through their supply chains and the end-use of their products. While these are considered indirect emissions, they also typically represent the largest chunk of a company’s carbon footprint. Trade groups, particularly in banking and agriculture, fiercely opposed that provision in the SEC’s initial proposal. The SEC ultimately dropped it, upsetting environmental groups.

The Sierra Club said it is also disappointed that the SEC’s final rule “eliminates key requirements for companies to quantify climate-related impacts to their assets and expenditures in financial statements.” The group, represented by nonprofit environmental law organization Earthjustice, said in a statement yesterday that it’s “considering challenging the SEC’s arbitrary removal of key provisions from the final rule, while also taking action to defend the SEC’s authority to implement such a rule.”

“As an investor, we expect full transparency about a company’s fundamentals, especially climate-related risks that pose serious negative financial consequences. Without higher accountability standards, companies can withhold critical information that prevents us from making informed investment decisions rooted in full due diligence,” Dan Chu, Sierra Club Foundation executive director, said in a statement.

SEC Chair Gary Gensler stands by the compromises made in the new rule. “I think today’s action is an important step for our U.S. capital markets,” he said in a statement yesterday. “These rules will enhance the disclosures that investors have been relying on to make their investment decisions.”