Can the SEC Close the Barn Door on Climate Rules?

On May 29, the SEC formally proposed rescinding its climate-related disclosure rules—the “Enhancement and Standardization of Climate-Related Disclosures for Investors” finalized back in March 2024. Those rules were among the Gensler-era SEC’s most consequential rulemakings, for both their breadth and the litigation they triggered. As adopted, they required registrants to disclose climate-related risks, oversight, and risk-management processes, along with financial line items for the effects of severe weather and similar events.

Making this 180-degree-turn took a while. Challenges to the rules’ validity started almost immediately, and in April 2024 the Commission stayed the rules pending litigation before the U.S. Court of Appeals for the Eighth Circuit. In March 2025, the SEC voted to abandon its defense. The court then held the case in abeyance until the agency either reconsidered the rules through notice-and-comment rulemaking or renewed its defense. In May, the SEC told the court it would pursue rescission, and the formal proposal followed shortly after.

SEC Chair Paul Atkins offered both policy and legal grounds for rescission, arguing that the rules imposed a heavy burden on companies that wasn’t necessary to protect investors and also that it amounted to a “dramatic overreach” of the agency’s authority.

For the largest companies, though, the practical effect may be modest. California, New York, and the European Union have all passed their own climate disclosure regimes that overlap with the SEC rules. As one attorney put it, the biggest global sellers will still have to comply with whatever Europe and California require. Smaller companies outside those regimes may experience comparatively lower compliance burdens.

California may play a significant role in determining the future direction of climate-related disclosure requirements. The Ninth Circuit is weighing a challenge to the state’s Climate-Related Financial Risk Act. SB 261, which requires companies above $500 million in revenue to report climate-related financial risks every two years, is on hold pending that decision and covers an estimated 3,000 to 4,000 companies. A parallel law, SB 253, targets companies above $1 billion and, to date, has survived. Under its current timeline, those companies must disclose Scope 1 and 2 emissions by August 10, 2026, with Scope 3 following in 2027. If California’s standards clear the courts, New Jersey, Colorado, New York, and Illinois all have laws ready to follow. Europe’s CSRD phases in fully by January 1, 2028, reaching non-EU companies that meet certain thresholds.

Even setting aside specific state and foreign mandates, the baseline obligation to disclose material information hasn’t gone anywhere. Companies would still have to assess climate matters under the SEC’s existing disclosure framework. If deemed material, those matters may surface as risk factors, in MD&A, in legal proceedings disclosures, or elsewhere. Rescinding the SEC’s climate rule will not eliminate climate-related disclosure obligations for many issuers but will likely shift the compliance focus toward a patchwork of state, international and traditional materiality-based disclosure requirements, requiring companies to maintain robust processes for identifying and evaluating climate-related risks.

The dedicated rule may be on its way out, but the underlying climate-related risks that prompted disclosure requirements in the first place haven’t gone with it.

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