Breaking News: SEC Withdraws Its Defense of Climate Disclosure Regulations

On March 27, the US Securities and Exchange Commission (SEC) announced that it will no longer defend Biden-era regulations requiring large corporations to disclose the impacts of climate change on their businesses. This announcement follows a vote by the SEC’s three-member governing body to end its defense of the rule and comes amid industry complaints that the rule was an overstep of the SEC’s authority.

Read the press release here.

This news follows significant shifts in the United States’ approach to climate change under the Trump Administration, including the deregulation of the US Environmental Protection Agency as discussed in our prior alert. The SEC’s acting chair described the climate disclosure mandates as “costly” and “unnecessarily intrusive.”

The Enhancement and Standardization of Climate-Related Disclosures for Investors (the Rule) was the first federal sustainability disclosure requirement in the United States and sought to inform investors by requiring registrants to provide information on greenhouse gas emissions, severe weather-related financial statement disclosures, and climate-related governance, targets, and risks disclosures. Among other mandates, the Rule required publicly traded companies to discuss climate-related risks that materially impacted, or were reasonably likely to materially impact, their companies when filing registration statements and annual reports.

However, the Rule never saw the light of day as it was quickly challenged and stayed following its adoption in March 2024, and has since been the subject of ongoing litigation consolidated in the Eighth Circuit.[1] In February, the SEC indicated its reluctance to defend the Rule before the Eighth Circuit, with the acting chairman calling it “deeply flawed.”

Though publicly traded companies will have less compliance burdens related to climate change as a result of the SEC’s decision, companies and investors alike should bear in mind the growing awareness of how climate impacts investment performance on a global level. In addition, the California climate disclosure laws (discussed here) and the European Union’s Corporate Sustainability Reporting Directive (though proposed to be pared back) will continue to drive disclosure of climate-related information for the time being.

Our team will continue to monitor developments and provide updates as they become available.

[1] Iowa v. Securities Exchange Commission, No. 24-1522 (8th Cir.)