SEC delivers finishing blow to climate disclosure rule

The SEC’s climate disclosure rule has been effectively dead for a while, and the commission set into motion last week the process to make things official.

On Friday, the SEC formally proposed rescinding a Biden-era set of rules requiring public companies to disclose climate-change risks affecting them as well as their greenhouse gas emissions. The agency had paused the rule’s implementation amid legal challenges in 2024. Then last year the SEC, under the leadership of new Chair Paul Atkins, said it would no longer defend the rule in court.

Friday’s proposed rescission, which includes a 60-day comment period, is “a foregone conclusion that’s been widely anticipated for nearly two years,” Steve Soter, VP and industry principal at Workiva, told CFO Brew in an email.

Still, the formal process has supporters cheering and opponents jeering.

“The Chamber is encouraged that the SEC is returning to the core principle of materiality,” Mike Flood, SVP of the US Chamber of Commerce’s Center for Capital Markets Competitiveness, said in a statement. The rule “would have far-reaching negative effects on the US economy and further disincentivize companies from going public in the United States.”

On the other hand, the SEC’s climate rule “makes sure people have information that they need to make important financial decisions,” Stephanie Jones, senior attorney for the Environmental Defense Fund, said in a statement. “We will vigorously oppose rolling back the rule, which would threaten the financial security of workers and retirees who have their life savings invested in the markets.”

This ain’t over. In its statement about the proposed rescission, the SEC said the climate rules “exceed the scope of the agency’s statutory authority” and “stray well beyond the policy concerns of the federal securities laws,” among other reasons it gave.

Assuming the SEC follows through with rescission, it still doesn’t mark the end for climate disclosures, at least not for every US public company.

Soter noted that many companies must still abide by state-level climate regulations, such as in California’s greenhouse gas reporting program. Multinational companies are subject to the European Union’s Corporate Sustainability Reporting Directive. Meanwhile, standards set by the International Sustainability Standards Board “are becoming a de facto global baseline,” Soter stated.

Beyond regulations, investors, lenders, and other stakeholders are still pressuring companies to report climate data.

“For many companies, the calculus remains fundamentally unchanged,” Soter said. “Companies that used the SEC rule as a catalyst to bring rigor and assurance to their sustainability data were not only preparing for compliance. They built the infrastructure necessary to reduce risk, identify opportunity, and articulate a credible story.”