US: SEC moves to freeze its climate disclosure rule

The US Securities and Exchange Commission (SEC) has taken steps to roll back its climate disclosure rule which would require publicly traded companies to disclose climate-related risks, a move that experts had already anticipated given US president Donald Trump’s anti-ESG approach.

In a statement on Tuesday, acting chair Mark Uyeda said the SEC’s legal team would tell the eighth federal appellate court that it was pausing its defense to legal challenges being brought against the disclosure rule. Uyeda also asked the court to not schedule arguments while the SEC determines next steps.

Uyeda said he believed the rule was “deeply flawed” and could harm the economy.

The rule, which had been watered down from its original scope, was challenged in court shortly after it was passed in March 2024 and enforcement of the rule had been on hold until litigation was concluded. Taking over two years to pass, the rule polarised opinion with the SEC receiving more than 24,000 comments.

Both Uyeda and SEC commissioner Hester Peirce voted against the climate disclosure rule and questioned the regulator’s authority to adopt it.

The news comes as the Trump administration has pulled out of the Paris Agreement and taken a clear anti-ESG stance, promising to invest more in oil and gas. In early January, US banks and brokers exited voluntary climate commitment groups. All three major bank regulators – the Federal Reserve, Office of the Comptroller of the Currency, and Federal Deposit Insurance Corporation – have also left the Network for the Greening the Financial System, a coalition of central banks aimed at helping the financial sector mitigate climate change risk.

The intent of the SEC’s climate disclosure rule was to give investors a better idea of the potential risks that companies face due to climate change, such as increased droughts and floods. Companies would have had to document their business activity’s impact on the climate, including greenhouse gas emissions, but did not go as far as to include supply chain or scope 3 emissions.

While the ruling has effectively been overturned, large US companies may still need to report their emissions. A state law in California requires all large companies in the state to disclose their emissions, while the EU’s climate reporting rules could impact thousands of US firms.

“Rescinding this rule would be a significant setback, further isolating the US on the global stage as climate-related financial risks continue to grow,” said Ben Cushing, sustainable finance campaign director at the Sierra Club.

The SEC’s rollback will make capital markets less efficient and make it easier for polluters to conceal risks, he added.

Clara Vondrich, senior policy counsel at nonprofit Public Citizen, said Uyeda “is yet another independent regulator doing Trump’s bidding”. The move disregards investor need for financial risk disclosure as climate risk is one of the biggest financial risks at the moment, she said.

“We are barreling toward a financial crisis that will harm everyone, and transparency around climate risk is more needed now than ever before”.