The U.S. Securities and Exchange Commission formally proposed Friday to rescind its 2024 climate disclosure rule that would have required publicly traded companies to disclose climate-related risks and emissions information. According to The Hill, the SEC, which currently consists of three Republican commissioners and no Democrats, issued a formal statement outlining its plans to scrap the rule. The proposal represents a formal reversal of the 2024 rule that was adopted when the commission had three Democrats and two Republicans, but had been on hold since last year after the Republican-led commission voted to stop defending the rule against court challenges. The SEC now describes the rule as going beyond the scope of its authority and as unnecessary, going beyond the policy concerns of securities laws and imposing significant costs on publicly traded companies. SEC Chair Paul Atkins stated on Fox Business that the agency should 'stick to our knitting' and let the Environmental Protection Agency handle climate-related matters while the SEC focuses on its core securities responsibilities.
The rescinded rule would have required all publicly traded companies to disclose information about ways in which climate change poses significant risks to their business, as reported by The Hill. For large companies, the rule would have mandated disclosure of information about greenhouse gas emissions directly caused by their business if that information would be likely to influence someone's decision on whether to invest. The 2024 corporate disclosure requirements, issued under former Chairman Gary Gensler, called on companies to report their pollution as well as how climate-related risks, like the threat of rising sea levels, hurricanes, droughts or wildfires, affected their bottom lines. Companies that took steps to minimize or eliminate such risks would have had to report those as well. At the time of its adoption, then-chair Gary Gensler stated the rule would give investors the ability to clearly compare companies' contributions to and risks from climate change, which worsens extreme weather. The SEC now believes the rule 'impose substantial costs on public companies and their shareholders that are not justified by the informational benefits they may provide to some investors.'
SEC officials indicated the agency now believes the climate disclosure rule was outside the agency's authority and imposed substantial costs on companies. According to The Hill, the rule could discourage capital formation, representing a significant concern for the regulatory body. The 2024 rules faced an onslaught of legal challenges from groups like the U.S. Chamber of Commerce, which argued the SEC had overstepped its authority in making such sweeping changes. The proposal is now subject to a 60-day public notice and comment period prior to any final decision from the SEC. The 2024 rule was one of the most anticipated from the nation's top financial regulator, drawing more than 24,000 comments from companies, auditors, legislators and trade groups over a two-year process. The rules were considered one of Washington's signature efforts to combat climate change, but the SEC faced mounting legal pressure that ultimately led to the agency's decision to stop defending the rules in court just two months after President Trump took office, essentially putting them in regulatory limbo.
Wall Street advocacy groups criticized the decision as undermining investor protection. As reported by The Hill, Benjamin Schiffrin, head of securities policy at Better Markets, which advocates for tougher policing of Wall Street and stronger investor protections, said the decision was part of what he called the SEC's 'assault on investors.' Schiffrin stated 'The risks public companies face matter to investors, and the SEC's proposal fails to acknowledge that climate-related risks are no exception.' Environmental groups had previously criticized the decision as leaving investors without crucial climate information, with Kathy Fallon, director of land systems at the nonprofit Clean Air Task Force, arguing that the SEC's mission is to protect investors and ensure they have access to material information. The SEC's current stance reflects a broader shift toward limiting the scope of securities regulation to core financial matters.
The SEC's decision aligns with broader efforts by the Trump administration to weaken climate-friendly regulations. As reported by The Hill, the current SEC commission has three Republican members including Atkins, with no Democrats, reflecting the political shift since the 2024 rule's adoption on a party-line vote when three Democrats supported and two Republicans opposed the measure. SEC Chair Paul Atkins stated that the agency should only require disclosures of information that is material to investors and does not dictate corporate behavior. The move is not a surprise, as the SEC had already voted to stop defending the 2024 rule against court challenges, with litigation being put on pause while the commission reconsidered the rule. Repeal of the climate-disclosure rule is among dozens of environmental rollbacks imposed in President Trump's second term, with the EPA eliminating major climate change programs and canceling billions of dollars in Biden-era environmental justice grants.
