SEC Takes Another Step Away From Climate Disclosure

On March 27, the Securities and Exchange Commission voted to stop defending the validity of its rules requiring disclosure of climate-related risks and greenhouse gas (GHG) emissions.  The Commission submitted a letter to the court in which challenges to rules are pending, informing it of the decision. 

In a press release announcing the vote, Acting Chair Uyeda said, “The goal of today’s Commission action and notification to the court is to cease the Commission’s involvement in the defense of the costly and unnecessarily intrusive climate change disclosure rules.”  Commissioner Crenshaw issued a statement attacking the decision:  “We do not have license to wholesale abandon agency action simply because the now-constituted Commission would not have supported the rule when it passed.” She suggested that the court appoint counsel to “vigorously advocate” in defense of the rules “on behalf of investors, issuers and the markets.” 

On March 6, 2024, the SEC adopted rules requiring public companies to disclose certain climate-related information, including material Scope 1 and Scope 2 GHG emissions.  See SEC Adopts Landmark Climate Change Disclosure Rules, March 2024 Update.  Several lawsuits were filed challenging the rules, and the Commission suspended their effectiveness pending the outcome of the cases, which were consolidated in the Court of Appeals for the Eighth Circuit.  See SEC Puts its Climate Disclosure Rules on Hold, April 2024 Update. 

In January, SEC Chair Gensler and Commissioner Lizarraga resigned, shifting the Commission from a 3-2 Democratic majority to 2-1 Republican control.  As described in Acting Chair Asks Court to Pause Challenges to SEC Climate Disclosure Rules, February, 2025 Update, on February 11, Acting SEC Chair Uyeda directed the Commission’s appellate litigation team to request that the court suspend consideration of the case while the Commission reconsidered its position.  The SEC’s March 27 letter to the court states simply that, since its request that the court suspend consideration, “the Commission has determined that it wishes to withdraw its defense of the Rules.”

Several state attorneys general have intervened in support of the climate disclosure rules, and it is possible that the litigation will continue without the Commission’s participation. Regardless of the future course of the judicial proceedings, it is likely that the SEC will eventually rescind the climate disclosure rules.  Recission – or modification – would however presumably require notice-and-comment rulemaking in accordance with the Administrative Procedure Act and could be a lengthy process.  A final Commission decision in such a proceeding could itself be subject to review in the federal courts.

As noted in last month's Update, for many companies, the SEC’s retreat from climate reporting may not be the end of the need to make GHG emissions and other climate-related public disclosures. Many U.S. companies will be subject to California’s climate disclosure requirements. See California Tweaks its Climate Disclosure Law But Reporting Deadlines are Unchanged, November 2024 Update.  In addition, U.S. companies that are active in the European Union may be required to comply with its sustainability disclosure regime, although the E.U. is in the process of narrowing the scope of its requirements. See E.U. is Dialing Dial Back Sustainability Reporting and Due Diligence.  Mandatory reporting aside, many public companies make climate disclosures voluntarily in response to investor interest in this information. See What Backlash? ESG Reporting Continues to Grow, September-October 2024 Update.