The U.S. Securities and Exchange Commission (SEC) announced on March 27 that it will no longer defend its controversial rules requiring companies to disclose climate-related risks, greenhouse gas (GHG) emissions, and governance practices. The decision, approved in a 3-2 vote along party lines, marks a significant shift in the agency’s approach to climate-related disclosures.
The SEC’s climate disclosure rule: What happened?
The federal financial oversight body adopted final rules in a historic 3-2 vote on March 6, 2024, under the Biden administration that mandated detailed financial reporting on climate-related risks and emissions by publicly traded companies. The move culminated two years of public debate and drew more than 24,000 comments but quickly sparked legal challenges.
For energy-intensive sectors like power, the new rules would have required disclosure of Scope 1 (direct) and Scope 2 (indirect) greenhouse gas emissions, if material, on a phased-in basis. (While Scope 3 disclosures were part of a draft rule, the measure was ultimately discarded in the final rule.)
Under the final rule, companies subject to the regulations would also have needed to report how severe weather events—like wildfires or hurricanes—affected annual reports and financial reporting, quantify expenses tied to climate adaptation or carbon offsets, and provide climate-related information on goals or targets.
Utilities and power producers flagged these climate-related disclosure requirements as costly and complex, given the scope of emissions tracking, attestation requirements, and integration into regulatory filings.
Legal challenges were ultimately consolidated in March 2024 in the U.S. Court of Appeals for the Eighth Circuit under State of Iowa et al. v. SEC (No. 24-1522). Briefing concluded in September 2024, well before the Trump administration took office.
On April 4, 2024, less than a month after adopting the final climate-related disclosure rules, the SEC issued a voluntary stay on their implementation pending judicial review. The agency acknowledged the rapidly mounting legal challenges and told the Eighth Circuit it would pause enforcement until litigation was resolved. At the time, the SEC indicated it intended to vigorously defend the validity of the climate rules. It emphasized that its 2010 climate guidance—often cited in enforcement actions and comment letters—would remain in effect.
A quick recap of the history of SEC Climate Disclosures
2010: The SEC issued its first formal guidance on climate-related disclosures, focusing on the impact of climate change on public companies. This guidance encouraged companies to disclose material climate-related risks, including how changes in natural conditions (e.g., extreme weather events) could affect their business operations and financial performance.
2012-2015: As climate change became a growing concern, the SEC began to expand its climate-related financial disclosures, encouraging companies to address both direct and indirect environmental risks. This included issues like renewable energy credits and the potential for increased regulatory requirements related to emissions reductions.
2016: The SEC issued additional guidance for public companies, clarifying the need for companies to disclose material risks related to climate change. This period saw increasing attention on how emerging growth companies (EGCs) could disclose climate-related risks, recognizing their unique regulatory challenges.
2017-2020: During these years, climate-related disclosures became more central to capital markets discussions. The SEC issued various updates to its disclosure rules to ensure that investors had access to relevant and consistent climate-related financial disclosures. Public companies were increasingly expected to disclose how their operations were impacted by natural conditions, including risks to infrastructure and supply chains.
2021: The SEC’s focus on climate change intensified under the Biden administration, with calls for more robust climate-related disclosures, particularly regarding how climate risks could impact a company’s future financial performance. Public companies were urged to consider long-term transition plans and how they planned to address emerging risks from climate change.
2024: The SEC took significant steps in updating its regulations for climate-related disclosures, proposing more detailed and standardized reporting requirements for public companies. This includes the requirement for companies to provide detailed climate-related information in their registration statements and periodic reports, including how they plan to manage risks associated with climate change and the transition to a low-carbon economy.
A shift under the current administration
The SEC’s decision to withdraw its legal defense of the climate-related disclosure rule was a clear indication of shifting priorities under President Trump’s administration. Acting SEC Chairman Mark Uyeda, who voted against the rule initially, led the charge in reversing the proposed rule. Uyeda called the rule “costly and unnecessarily intrusive” and sought to suspend legal proceedings while determining “next steps.”
His stance aligns with the administration’s broader deregulatory approach, particularly concerning climate-related risks in financial reporting. President Trump’s nominee for SEC Chair, Paul Atkins, currently undergoing the confirmation process, has also opposed the climate reporting rule, reinforcing expectations that the rollback will be permanent.
Why businesses should still prioritize climate related reporting
Despite the SEC’s decision, businesses should not abandon climate-related disclosures. Smart companies recognize that sustainability reporting is not just about compliance—it’s about future-proofing operations, building resilience, and maintaining stakeholder trust.
Customers expect action
Consumers are more loyal to businesses with strong environmental and social commitments. Companies that prioritize sustainability build trust, enhance their brand, and drive customer retention. Highly trusted companies outperform others by up to 400% in terms of market value.
Risk resilience is powered by sustainability
89% of business leaders consider resilience one of their most important strategic priorities. Companies that proactively manage material climate-related risks and adhere to sustainability disclosure standards strengthen their organization’s ability to withstand and adapt to various disruptions while avoiding reputational damage. Potential risks are not just a regulatory issue but a core business concern that affects supply chains, operations, and the financial condition of many businesses.
Investors are making net-zero decisions
450 financial institutions, managing 40% of global capital, are committed to net-zero investments. Businesses with strong climate programs integrated into their financial statements, are more attractive to investors and lenders.
Supply chains are raising the bar
With a third of the global economy committed to science-based targets, major companies expect their suppliers to disclose climate information and take meaningful climate action. Businesses that fail to act risk losing contracts and market share. Many large corporations are requiring their suppliers to provide material climate-related information, conduct scenario analysis, and establish transition plans to ensure alignment with sustainability goals.
Top talent is choosing purpose-driven companies
One in three young professionals have rejected job offers from companies with weak ESG commitments. Strong sustainability programs help attract and retain the best talent. Younger generations increasingly want to work for organizations that align with their values and demonstrate clear environmental responsibility.
Regulations are evolving
Even if SEC rules no longer apply, disclosure requirements for sustainability are expanding globally. The European Union’s Corporate Sustainability Reporting Directive (CSRD) and other climate disclosure requirements are pushing businesses toward greater transparency. Companies subject to these regulations must report on their business model, climate-related targets, and emissions reduction strategies.
The business advantage of sustainability reporting
Tracking and reporting on sustainability isn’t just about compliance—it’s a strategic decision that strengthens a company’s position in the market. Businesses that voluntarily disclose climate risks and their strategies for addressing them benefit from improved investor confidence and stronger stakeholder relationships.
Scenario analysis, a key tool in corporate sustainability planning, allows businesses to evaluate how different climate-related risks could impact their operations under varying conditions. By integrating transition plans into their strategies, companies can mitigate potential disruptions and align with long-term sustainability goals.
As Rachel Delacour, CEO of Sweep, states:
“The demand for climate-related information from investors, customers, and stakeholders continues to grow. This demand isn’t a passing trend and won’t disappear because the SEC has decided to pull back on it. Companies that are serious about their long-term success will continue to prioritize the transparent and proactive disclosure of their climate impacts. Those who wish to embrace transparency will build trust with investors and strengthen their brand.”
Stay ahead, stay competitive, stay resilient
The SEC may have reversed course on climate-related disclosures, but the market is moving in a different direction. Businesses that voluntarily disclose sustainability data will maintain a competitive advantage, attract investment, and build stronger, more resilient operations for the future. As disclosure requirements continue evolving globally, companies that prepare now will be better positioned to thrive in a changing regulatory landscape.
