SEC Discontinues Defenses of Biden-Era Climate Disclosures

The U.S. Securities and Exchange Commission (SEC) has voted to stop defending its climate-related disclosure rules in court. These rules, finalized last year, required companies to disclose their greenhouse gas emissions and assess climate-related risks to their operations. The decision to abandon legal defense follows numerous challenges from industry groups and Republican-led states, who argued that the regulations exceeded the SEC's authority and imposed undue burdens on businesses. 

Acting SEC Chair Mark Uyeda stated that the move aims to "cease the Commission's involvement in the defense of the costly and unnecessarily intrusive climate change disclosure rules." This decision aligns with the current administration's broader efforts to roll back climate-related regulations, reflecting President Donald Trump's commitment to boosting fossil fuel development and reducing environmental oversight. 

The SEC's lone Democratic commissioner, Caroline Crenshaw, criticized the decision, asserting that it unlawfully seeks to undo valid regulations by ceasing to defend them in court rather than following proper procedures to change or repeal them. She has called on the court to appoint an independent counsel to defend the rule in the SEC's absence, emphasizing the importance of providing investors with information about climate-related risks. 

Investor advocates and environmental groups have expressed disappointment, arguing that the reversal leaves investors without clear, standardized information to assess climate-related financial risks. Despite the SEC's withdrawal, several companies will likely continue to report climate-related information voluntarily, driven by investor demand and state-level requirements. 

While the SEC's decision signals a federal pullback on climate disclosure requirements, California is moving in the opposite direction. The state has enacted landmark climate disclosure legislation, demonstrating its commitment to transparency and accountability. Expect litigation on both the SEC and California rules to continue as the web of climate disclosure requirements continues to spin.