SEC pushes to dismantle landmark climate disclosure rule

Following earlier rumors, the SEC has formally proposed rescinding its climate-related disclosure rules, marking a reversal of one of the Biden administration’s flagship ESG policies and reopening a debate over the regulator’s role in climate reporting.

The proposal would eliminate rules adopted in March 2024 that required public companies to disclose climate-related risks, greenhouse gas emissions and the financial impacts of severe weather events. The rules never took effect after being challenged in court by business groups and Republican lawmakers, with the SEC pausing implementation in April 2024 before ending its legal defense of the framework in March 2025.

In a statement, SEC chairman Paul Atkins said the agency was returning to a materiality-based approach to disclosure.

'SEC disclosure obligations should comply with the Commission’s statutory authority, be guided by materiality as the North Star, avoid the practical effect of dictating corporate behavior and be imposed only when the expected benefits justify the likely costs and burdens,' he added.

According to the regulator’s proposal, the requirements were inconsistent with a registrant-specific approach to disclosure, imposed substantial costs on issuers and could discourage companies from going public.

Commissioner Mark Uyeda backed the move, describing it as 'a step towards refocusing our efforts on what matters most to investors: financial materiality'. Commissioner Hester Peirce also supported the proposal, arguing that the SEC should maintain a 'materiality-centric disclosure framework' rather than using securities regulation to pursue climate policy objectives.

Similarly, the proposal was welcomed by the US Chamber of Commerce, which was among the groups that sued to block the original rule back in 2024.

'The Chamber is encouraged that the SEC is returning to the core principle of materiality, allowing investors to gather crucial business information through corporate disclosure,' said Mike Flood, senior vice president of the Center for Capital Markets Competitiveness. He added that the climate rule would have had 'far-reaching negative effects on the US economy' and further discouraged public listings.

But investor advocates and environmental groups sharply criticized the decision, warning that it would weaken transparency around financially material climate risks.

Benjamin Schiffrin, director of securities policy at Better Markets, a nonprofit advocacy organization, said the move 'threatens to leave investors in the dark'. He added: 'The risks public companies face matter to investors, and the SEC’s proposal fails to acknowledge that climate-related risks are no exception.'

Danielle Fugere, president and chief counsel of As You Sow, described the climate disclosure framework as 'the single most important advance in corporate transparency in a generation'.

'Climate risk is not theoretical. It is hitting company balance sheets right now through catastrophic losses, supply chain disruptions, failing crops, and skyrocketing insurance premiums that are also destabilizing entire markets,' she added.

'Rescinding this rule doesn’t make climate risk disappear. It makes it invisible to investors at precisely the moment they need the information most.'

As You Sow also warned that the SEC’s legal reasoning could extend beyond climate disclosures. CEO Andrew Behar said the approach could undermine future disclosure requirements covering areas such as AI risk and cyber-security threats.

Environmental advocacy group The Natural Resources Defense Council (NRDC) echoed those concerns. Tom Zimpleman, senior attorney at NRDC, said: 'The SEC is shirking its responsibility to protect investors. Climate risk is financial risk.' He warned investors would be 'left in the dark about the material risks companies face from climate change'.

With the SEC’s proposal entering a 60-day public consultation, all indicators point to a full revocation of the ESG reporting rule, in line with the Trump administration’s shift away from mandatory ESG-related disclosures and toward a narrower interpretation of materiality under federal securities laws.

But even if the federal rules are ultimately rescinded, many companies will still face climate reporting obligations under state-level requirements in California and disclosure regimes in other jurisdictions, including the European Union. Whether the move delivers the results its supporters expect remains to be seen.