SEC no longer defends climate reporting rules

The U.S. Securities and Exchange Commission (SEC) recently made a significant decision to halt its support for climate disclosure rules. This move effectively means that the SEC is stepping away from its mandate to require companies to report on climate risks and greenhouse gas emissions, although the rules themselves have not been officially rescinded.

The announcement was made by SEC Acting Chairman Mark Uyeda, who expressed his views on the rule by calling it “costly and unnecessarily intrusive.” Uyeda took on the role of Acting Chair following the departure of former Chair Gary Gensler in January, after Donald Trump’s election. The nominee for SEC Chair, Paul Atkins, who is currently undergoing the confirmation process, has also expressed opposition to the climate reporting rule.

Initially released and adopted in March 2024 under Gensler’s leadership, the rules laid out requirements for public companies in the U.S. to disclose information on the climate risks they face, their plans to mitigate those risks, the financial implications of extreme weather events, and, in some cases, emissions of greenhouse gases from their operations.

Challenges to the rule quickly emerged following its introduction, with nine court petitions filed within a mere 10 days. These legal challenges included a lawsuit against the rule filed by 25 Republican state attorneys general, spearheaded by Iowa Attorney General Brenna Bird, as well as an appeals court motion requesting a suspension of the rules led by the U.S. Chamber of Commerce. These petitions were consolidated in the Eighth Circuit court, leading to a decision by the SEC to pause the implementation of the climate disclosure rule while the legal challenges were reviewed. Despite this pause, the SEC had initially planned to vigorously defend the newly established disclosure requirements.

However, in a recent update, the SEC notified the court that it is retracting its defense and will no longer have Commission counsel advocate for the rule. This decision has sparked backlash, with SEC Commissioner Caroline Crenshaw criticizing the SEC’s perceived attempt to have the court terminate the rule instead of following proper procedures to rescind or modify it. She emphasized that despite the Commission’s actions, the demand for the climate reporting rule from the investing public remains strong.

Investors focused on sustainability have also voiced their opposition to the SEC’s decision, emphasizing the crucial need for climate-risk-related information from companies. Steven M. Rothstein, Managing Director for the Ceres Accelerator for Sustainable Capital Markets, highlighted the significant support behind the rule from investors with $50 trillion in assets under management. He emphasized that this move by the SEC is a setback in providing investors and other market participants with essential information to manage financial risks related to climate change.