SEC Moves Toward Rescinding Climate Disclosure Rule, Retreating Further From Investor Protection

The Securities and Exchange Commission (SEC) has taken a significant step towards rescinding its 2024 climate disclosure rule by submitting a proposed rule titled “Rescission of Climate-Related Disclosure Rules” to the White House Office of Management and Budget for review. This move marks a retreat from the agency’s earlier efforts to mandate that public companies disclose standardised information on financially material climate-related risks and, for certain firms, greenhouse gas emissions. The original rule, which has not yet come into effect due to ongoing litigation, aimed to provide investors with consistent and comparable climate risk data to better inform their decisions. The 2024 climate disclosure rule, formally known as “The Enhancement and Standardization of Climate-Related Disclosures for Investors,” was adopted in March 2024 after a lengthy rulemaking process. It sought to address both physical risks from climate impacts and transition risks as the economy shifts towards sustainability. However, the final version was diluted from its initial proposal, notably removing requirements for Scope 3 emissions disclosures. Legal challenges from corporate interests and political allies have stalled the rule’s implementation, with the SEC ultimately deciding in early 2025 to cease defending it in court and signalling the need for a public comment process before any formal removal. Environmental advocates and sustainable finance experts have strongly criticised the SEC’s decision to withdraw the rule. Jessye Waxman of the Sierra Club described the move as a failure to protect investors and the public interest, emphasising that climate risks are widely recognised as financially material. Waxman argued that abandoning the rule would represent a backward step for market transparency, undermining efforts to establish a federal baseline for climate-related disclosures that could ensure consistency and comparability across companies. The Sierra Club, a leading environmental organisation, has actively supported the rule and submitted legal briefs defending the SEC’s authority to regulate climate disclosures. The potential rescission of the SEC’s climate disclosure rule comes at a time when investor demand for such transparency remains high. Analysis by Ceres highlighted near-unanimous support from hundreds of institutional investors, representing trillions of dollars in assets, for standardised climate risk reporting. Meanwhile, other US states and major global jurisdictions continue to advance their own climate disclosure frameworks, raising concerns that the absence of a federal standard could create regulatory fragmentation and reduce the overall effectiveness of climate risk management in the US market. The SEC’s next steps will be closely watched by investors, environmental groups, and industry stakeholders alike.