Dive Brief:
- The Securities and Exchange Commission began the process of formally rescinding its 2024 climate-risk disclosure rule this week, an agency spokesperson confirmed to ESG Dive Thursday.
- The agency submitted a proposal to rescind the rule to the Office of Information and Regulatory Affairs on May 4, and the spokesperson said that the SEC’s staff is “preparing a recommendation to the Commission to rescind the agency’s 2024 climate rules.”
- The SEC finalized the Biden-era climate-risk disclosure rule in March 2024 under prior Chair Gary Gensler, but the rule immediately faced legal challenges. Following the changeover to the Trump administration, the agency looked to withdraw its defense of the rule in court, but a federal judge said last fall that “it is the agency’s responsibility to determine whether its Final Rules will be rescinded, repealed, modified, or defended in litigation.”
Dive Insight:
The SEC staff is preparing to rescind the rule at Chair Paul Atkins’ direction, the agency spokesperson said. A formal effort to ditch the rule this year was expected by ESG reporting experts, including Ropes & Gray Partner Michael Littenberg. Even with a formal rescission of the rule, companies will still face a complex climate risk disclosure landscape that includes domestic and international regulations.
Under Gensler, the SEC approved the rule by a 3-2 vote, with Commissioners Mark Uyeda and Hester Peirce voting against it. Atkins, Uyeda and Peirce are currently the agency’s only commissioners, and all three have expressed a belief that the rule extends beyond the agency’s remit.
“Under Chairman Atkins, the Commission is focused on returning the agency to its core mandate — in line with its legal authority — restoring a materiality-focused approach to securities regulation,” the SEC spokesperson said in an emailed statement.
The SEC’s climate-risk disclosure rule was proposed in 2022 and took nearly two years to reach approval. The final rule would have required companies to disclose climate-related risks that have had or are “reasonably likely to have” material impacts, any climate mitigation undertaken as part of a company’s strategy and more.
The rule, which would have only applied to companies defined as large accelerated filers and accelerated filers, also would have phased in scope 1 and scope 2 emissions reporting, while eliminating a proposal for companies to report their scope 3 emissions.
Facing a number of lawsuits challenging the rule, Gensler issued a stay as the court worked through the challenges that were consolidated into the Eighth Circuit Court of Appeals. Shortly after Trump’s inauguration, Uyeda — then the acting SEC chair — asked the court not to schedule arguments in the case, and Atkins directed the SEC staff to formally withdraw its defense in March 2025. The judge in the consolidated case gave the order requiring the SEC to formally rescind, repeal, modify or resume its defense in September.
Despite the lack of a federal climate risk reporting law in the U.S., disclosure regulations are, somewhat, still on the books in California, while New York works to advance its own climate reporting law. Additionally, a growing number of international jurisdictions have adopted some form of climate-risk disclosure rules.
