SEC Pulls Back from Climate Disclosure Rule

In a move that’s hotter than earnings day on Wall Street, the U.S. Securities and Exchange Commission (SEC) officially pulled the plug on defending its own climate disclosure rules. On March 27, 2025, the Commission voted to withdraw from ongoing litigation over its 2024 regulations that would’ve required public companies to disclose climate-related risks, greenhouse gas emissions, and financial exposure tied to severe weather events.

From Rollout to Retreat

The rules, adopted in March 2024, were intended to help investors better understand how environmental risks could impact a company’s operations and financial performance. They would have required public companies to disclose their emissions, mitigation efforts, and any significant financial impact from climate change.

However, following legal challenges from several states and business groups, the SEC paused implementation and has now formally withdrawn its legal defense. “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,” said Acting Chairman Mark Uyeda in a statement. SEC staff also sent a letter to the U.S. Court of Appeals for the Eighth Circuit, noting that commission counsel would no longer argue the case or participate in oral arguments.

All That Hype

The litigation surrounding the rules, consolidated under Iowa v. SEC, focused on whether the SEC overstepped its authority by mandating such disclosures. With the legal process already underway and implementation delayed, the SEC’s vote effectively places the federal rule on indefinite hold. This shift may leave some companies that had already invested in climate reporting systems in limbo. Many had been preparing to meet the 2026 compliance timeline, aligning their reporting with global standards such as the International Sustainability Standards Board (ISSB) under IFRS, chasing the climate targets set by the Paris Agreement.

Now What?

The SEC stepping back has broad implications. For companies, it reduces immediate compliance costs and legal uncertainties. However, it also creates fragmentation—firms operating internationally or in proactive states may still face reporting obligations. For investors, this move limits access to consistent and standardized climate-related data. Without a unified federal framework, disclosures may vary in quality, comparability, and scope, making it harder to assess long-term risks. It may also signal limitations in the SEC’s authority to expand disclosure mandates, setting a precedent for future regulations.

Voluntary Still Vibes

Even without a federal mandate, many companies are expected to continue voluntary Environmental, Social, and Governance (ESG) disclosures. More than 90% of Russell 1000 companies already provide some level of climate-related data to meet investor expectations and demonstrate transparency. For firms operating globally, climate reporting is still very much on the table. Jurisdictions like the European Union have implemented stricter climate disclosure requirements that U.S.-based multinationals must follow. Additionally, certain U.S. states such as California and Colorado are exploring or advancing their disclosure frameworks.

The Pressure's Still On

The SEC may have stepped back from this particular rule, but the broader conversation around climate-related disclosures isn’t cooling off. Investor demand for transparency, state-level action, and international alignment ensures that companies still face expectations to “open their carbon books.” Want more updates on financial regulations and disclosures? Follow us for insights that matter.