SEC Proposes Full Rescission of 2024 Climate Disclosure Rules Citing Statutory Authority and Materiality Concerns

The Securities and Exchange Commission has proposed the complete rescission of its 2024 climate-related disclosure rules, which required public companies to provide granular information about greenhouse gas emissions, climate risk management and the financial statement effects of severe weather events in their registration statements and annual reports. SEC Chairman Paul Atkins framed the proposal as returning the agency to its core mandate and restoring a materiality-focused approach to securities regulation, arguing that disclosure obligations should comply with the Commission's statutory authority and be imposed only when expected benefits justify likely costs and burdens. The public comment period will remain open for 60 days following publication in the Federal Register.

 

The History and Legal Context of the Rescission Proposal

 

The climate disclosure rules were originally approved by the Commission in March 2024 under the Securities Act of 1933 and Securities Exchange Act of 1934, mandating highly specific and granular climate-related disclosures from virtually all United States public companies. On 4 April 2024, the Commission stayed the rules pending completion of consolidated litigation in the US Court of Appeals for the Eighth Circuit, and on 27 March 2025 voted to end its defense of the final rules. On 12 September 2025, the Eighth Circuit issued an order holding the consolidated petitions for review in abeyance pending the Commission reconsidering the challenged rules by notice-and-comment rulemaking or renewing its defense, leading to the current rescission proposal.

Chairman Atkins said SEC disclosure obligations should comply with the Commission's statutory authority, be guided by materiality as the North Star, avoid the practical effect of dictating corporate behaviour and be imposed only when expected benefits justify likely costs and burdens. The Commission's position is that the climate disclosure rules exceed the scope of the agency's statutory authority, and that even if statutory authority existed, independent policy reasons would justify rescission. These policy reasons include the Commission's view that the rules are unnecessary and inconsistent with a registrant-specific, materiality-based approach, that they stray beyond the policy concerns of federal securities laws and that they impose substantial costs on public companies and shareholders not justified by informational benefits to investors.

 

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Implications for US Corporate Climate Disclosure

 

The proposed rescission would eliminate the only comprehensive federal mandate for climate-related financial disclosure by US public companies, reverting to the pre-2024 position in which climate disclosure was guided by general materiality principles rather than specific requirements. Companies that have been preparing compliance infrastructure for the 2024 rules would face uncertainty about the appropriate scope and format of voluntary climate disclosure in the absence of mandatory federal requirements. The rescission would also remove the Scope 1 and Scope 2 greenhouse gas emissions reporting requirements that formed one of the most operationally significant elements of the 2024 rules.

The proposal does not affect state-level climate disclosure requirements, most significantly California's SB 253 Climate Corporate Data Accountability Act and SB 261 Climate-Related Financial Risk Act, which impose emissions and climate risk disclosure obligations on large companies operating in the state regardless of federal rules. It also does not affect the voluntary disclosure frameworks used by many large US companies including the Task Force on Climate-related Financial Disclosures recommendations and the ISSB standards. However, the removal of federal mandatory requirements significantly reduces the compliance pressure driving adoption of these frameworks among companies that have not voluntarily committed to climate disclosure.

 

Global and Investor Implications

 

The SEC rescission proposal reinforces the divergence between United States and European regulatory approaches to climate disclosure, with the EU's Corporate Sustainability Reporting Directive imposing mandatory double-materiality climate and sustainability disclosure requirements on large companies including US multinationals with significant European operations. This regulatory divergence creates a two-tier system in which US-listed companies face different disclosure expectations depending on whether they have European market exposure, potentially creating competitive complexity and investor confusion as companies navigate inconsistent international requirements.

Institutional investors who have incorporated climate disclosure data into their investment processes, risk assessments and stewardship activities will face reduced availability of standardised, comparable climate information from US public companies if the rescission is finalised. Major asset managers including those representing significant retirement savings assets have built analytical infrastructure around the expectation of mandatory US climate disclosure, and the removal of federal requirements may increase reliance on voluntary disclosure frameworks whose coverage and quality vary significantly across companies and sectors.

 

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Outlook for US Climate Disclosure Policy

 

The 60-day public comment period will generate significant input from investor groups, environmental organisations, business associations and state regulators with divergent views on the appropriate scope of SEC climate disclosure authority. The final rescission decision will follow review of these comments under the Administrative Procedure Act's notice-and-comment rulemaking requirements, providing a formal procedural pathway that may generate legal challenges from parties who argue the rescission itself exceeds the Commission's authority or is arbitrary and capricious. The political durability of the rescission beyond the current administration will also be a critical question for long-term US climate disclosure policy.

Whether the absence of federal mandatory climate disclosure creates a lasting gap in US capital market information or is filled by continued voluntary adoption of international frameworks will depend on investor demand, state-level requirements and the competitive pressure on US companies from international peers subject to mandatory disclosure regimes. European, UK and Australian mandatory disclosure requirements applicable to US multinationals will continue to drive climate data collection and reporting by many large US companies regardless of the SEC's position. The divergence between US federal policy and the trajectory of global mandatory climate disclosure standards is likely to intensify in the near term.

 

 

Source: SEC