SEC Shifts Stance, Pulls Back Defense of Climate Disclosure Rules

Key Takeaways

• SEC Withdrawal: The SEC has voted to cease defending the climate disclosure rules it adopted in March 2024, stepping back from its involvement in ongoing litigation.
• Climate Disclosure Rules: These rules required public companies to disclose detailed climate-related risks and their greenhouse gas emissions, aiming for increased corporate transparency.
• Legal Challenges: The rules have faced significant pushback, resulting in a legal battle consolidated in the Eighth Circuit (Iowa v. SEC), with states and private entities challenging the regulations.
• Court Notification: The SEC has formally notified the court that it will no longer support the defense of the rules, withdrawing its arguments and yielding oral argument time to the court.
• Uncertain Future: With the SEC’s withdrawal, the future of the climate disclosure regulations is now uncertain, as the court will continue to review the case without the SEC's defense.

Deep Dive

In what is sure to be a controversial turn of events, the U.S. Securities and Exchange Commission (SEC) has decided to pull back from its defense of the much-debated climate disclosure rules. A move that may change the course of corporate environmental regulation, the SEC’s vote today marks a shift in its approach to climate-related corporate transparency.

Acting SEC Chairman Mark T. Uyeda was direct in his statement, explaining that the Commission was stepping away from supporting the rules, “The goal of today’s Commission action and notification to the court is to cease the Commission’s involvement in the defense of the costly and unnecessarily intrusive climate change disclosure rules.”

These rules, adopted on March 6, 2024, required public companies to disclose detailed information about climate risks and greenhouse gas emissions. The goal was to provide stakeholders with a clear, standardized view of how companies were impacting (and being impacted by) the changing climate. However, the regulations faced pushback from states and private parties, leading to a legal showdown in the Eighth Circuit court.

Today’s decision, which follows a stay of the rules’ enforcement during the ongoing litigation, means that the SEC will no longer support the framework in court. The Commission’s staff formally notified the court that it will withdraw its defense of the rules, with SEC legal counsel now relinquishing any arguments they had filed. Additionally, the SEC yielded its oral argument time back to the court.

With this unexpected retreat, the future of the SEC’s climate disclosure requirements is now in the hands of the court. While environmental advocates may view this as a setback for transparency, opponents of the rules will likely see this as a victory in their ongoing battle to limit regulatory burdens on companies.

As the case progresses, the broader question of how—if at all—companies should disclose climate risks and emissions remains open for debate. With the SEC stepping out of the ring, the path forward for these regulations is anything but clear.

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