The U.S. Securities and Exchange Commission (SEC) announced today that it has voted to end its legal defense of its climate disclosure rules, effectively walking away from its regulation requiring companies to report on climate risks and greenhouse gas emissions, without actually having to rescind the rules.

In a statement announcing the Commission’s decision, SEC Acting Chairman Mark Uyeda, who had voted against the initial rule, called the rule “costly and unnecessarily intrusive.” Uyeda was appointed Acting Chair after the resignation of prior Chair Gary Gensler in January, following the election of Donald Trump. Trump’s nominee for SEC Chair, Paul Atkins, currently undergoing the confirmation process, has also opposed the climate reporting rule.

In February, Uyeda announced that he would request that legal proceedings against the new climate disclosure regulation be postponed pending “next steps” regarding the rule.

Under Gensler, the SEC announced the release and adoption of the new rules in March 2024, establishing for the first time requirements for public companies in the U.S. to provide disclosure on climate risks facing their businesses, plans to address those risks, the financial impact of severe weather events, and, in some cases, greenhouse gas emissions originating from their operations.

The rule faced a series of legal challenges immediately following its release, with nine court petitions filed within 10 days, including a lawsuit against the rule filed by 25 Republican state attorneys general, led by Iowa AG Brenna Bird, and another appeals court motion requesting a stay of the rules led by the U.S. Chamber of Commerce.

The petitions were subsequently consolidated in the Eighth Circuit court, and the SEC announced in April that it would pause the implementation of the climate disclosure rule pending a review of the legal petitions, but noting that it planned to “continue vigorously defending” the new disclosure requirements.

In August, the SEC launched its defense of the rule in court, arguing that the proposed disclosures in the rule provide “information directly relevant to the value of investments,” and that it is within the Commission’s authority to mandate climate risk disclosures.
In the SEC’s update, however, the Commission said that it has now sent a letter to the court withdrawing its defense, and will no longer allow Commission counsel to advance the defense’s arguments.

In a statement released following the decision, SEC Commissioner Caroline Crenshaw, who had supported the rule’s adoption, criticized the Commission’s move to “walk away from the Climate-Related Disclosures Rule,” in a process through which the Commission effectively “is hoping to let someone else do their dirty work,” leaving the court to end the rule, rather than following proper procedures to rescind or amend the regulation. Crenshaw added that the “vigorous demand by the investing public” for the climate reporting rule has not changed.

Sustainability-focused investment also opposed the decision, noting the strong demand for investors for climate risk-related information from companies. In a statement following the announcement, Steven M. Rothstein, Managing Director for the Ceres Accelerator for Sustainable Capital Markets, said:

“Investors have clearly indicated they require better disclosure, with $50 trillion in assets under management broadly supportive of the rule adopted in March 2024. This is clearly a step backward in helping investors and other market participants have the information they need to manage climate-related financial risks.”