SEC Abandons Defense of Climate Disclosure Rules

The U.S. Securities and Exchange Commission (SEC) voted to halt its defense of the climate disclosure rules introduced under the leadership of former SEC Chair Gary Gensler.

The rules, which aimed to provide investors with information on companies' climate-related risks and their impact on the environment, have been the subject of intense legal and political debate. In a filing with the U.S. Court of Appeals for the Eighth Circuit on March 27, the SEC stated that “the Commission has determined that it wishes to withdraw its defense of the Rules” and its lawyers are “no longer authorized to advance” the Commission's prior arguments for the Rules.

The SEC's decision to no longer defend these rules marks a significant shift in the U.S. regulatory landscape and raises questions about the future of climate-related disclosures in financial reporting. U.S. public companies have been riding the roller coaster of this rule-making journey, and they must continue to watch as parties to the litigation determine what course to take now.  For one, the states that intervened to defend the Rule could take up the mantle and defend the SEC's authority to promulgate the Rules. If the Eighth Circuit allows the litigation to proceed, it could issue a ruling on the SEC's authority to mandate climate-related disclosures that would bind future administrations.