SEC Proposes Full Rescission of 2024 Climate Disclosure Rules

The U.S. Securities and Exchange Commission has formally proposed the full rescission of its landmark climate-related disclosure rules, which were originally adopted in March 2024 [1]. This proposal marks a significant shift in federal policy, effectively abandoning a regime that would have required public companies to report detailed information regarding greenhouse gas emissions and climate-related financial risks [2].

Key takeaways

• The SEC’s proposal to rescind the rules is now open for a 60-day public comment period following its publication in the Federal Register [1].
• The 2024 rules never took effect, as they were stayed by the Commission in April 2024 pending consolidated litigation in the Eighth Circuit [1].
• Despite the potential rescission, public companies remain subject to existing disclosure requirements under Regulation S-K and Regulation S-X, as well as federal anti-fraud provisions [1].
• Market-driven disclosure is expected to persist, as approximately 47% of annual filings in 2024 and 2025 already included climate-related keywords [1].
• California’s SB 253 remains in effect, requiring certain companies to report Scope 1 and Scope 2 emissions starting in 2026 [1].

A Shift in Regulatory Philosophy

The SEC’s decision to move toward rescission follows years of legal challenges and internal debate regarding the agency's authority [2]. The Commission argues that the original rules exceeded its statutory limits under the Securities Act and the Exchange Act [2]. Current leadership has characterized the mandates as unnecessary and inconsistent with a materiality-based approach to disclosure, suggesting that the costs imposed on companies and shareholders were not justified by the potential informational benefits [2].

The proposed rescission reflects a broader recalibration of the SEC’s approach to environmental, social, and governance (ESG) reporting [1]. Commissioners Atkins, Mark Uyeda, and Hester Peirce, who opposed the original rules, have emphasized a desire to re-examine disclosure mandates to ensure they align with the Commission's statutory authority and prioritize materiality [2]. By withdrawing these rules, the agency aims to reduce litigation exposure for registrants, as the 2024 framework would have subjected climate disclosures to specific Securities Act and Exchange Act liability [1].

Why it matters

The move away from a centralized federal framework creates a fragmented landscape for investors and corporations [1]. While the SEC’s mandate is being rolled back, institutional investors continue to demand climate-related data, and companies must still navigate a patchwork of state-level mandates, such as California’s SB 253, and evolving international standards like those from the ISSB and the EU [1].

For reporting companies, the transition period serves as a reminder that the market’s appetite for climate transparency remains high despite the change in federal policy [1]. Legal counsel and market participants are encouraged to audit current disclosure practices against existing legal requirements and voluntary frameworks, as state and international mandates may ultimately set the floor for future climate-related reporting [1]. The comment period will allow stakeholders to weigh in on the proposal, though the current political and judicial trajectory suggests the rescission is likely to be finalized [1].