The U.S. Securities and Exchange Commission (SEC) announced on March 27 that it will no longer defend its controversial rules requiring companies to disclose climate-related risks, greenhouse gas (GHG) emissions, and governance practices. The decision, approved in a 3-2 vote along party lines, marks a significant shift in the agency’s approach to climate-related financial disclosures.
The federal financial oversight body adopted final rules in a historic 3-2 vote on March 6, 2024, under the Biden administration that mandated detailed reporting on climate risks and emissions by publicly traded companies. The move culminated two years of public debate and drew more than 24,000 comments but quickly sparked legal challenges.
For energy-intensive sectors like power, the rules would have required disclosure of Scope 1 (direct) and Scope 2 (indirect) greenhouse gas emissions, if material, on a phased-in basis. (While Scope 3 disclosures were part of a draft rule, the measure was ultimately discarded in the final rule.) Under the final rule, companies would also have needed to report how extreme weather events—like wildfires or hurricanes—affected financial statements, quantify expenses tied to climate adaptation or carbon offsets, and provide information on climate-related goals or targets. Utilities and power producers flagged these requirements as costly and complex, given the scope of emissions tracking, attestation requirements, and integration into regulatory filings.
Legal challenges were ultimately consolidated in March 2024 in the U.S. Court of Appeals for the Eighth Circuit under State of Iowa et al. v. SEC (No. 24-1522). Briefing concluded in September 2024, well before the Trump administration took office.
On April 4, 2024, less than a month after adopting the final climate disclosure rules, the SEC issued a voluntary stay on their implementation pending judicial review. The agency acknowledged the rapidly mounting legal challenges and told the Eighth Circuit it would pause enforcement until litigation was resolved. At the time, the SEC indicated it intended to vigorously defend the validity of the Climate Rules. It emphasized that its 2010 climate guidance—often cited in enforcement actions and comment letters—would remain in effect.
SEC Pulls Support for Climate Risk Rule
On March 27, 2025, the SEC’s decision to withdraw its defense of the rules was formalized during a commission vote. Acting Chairman Mark T. Uyeda and Commissioner Hester M. Peirce voted in favor of ceasing the agency’s involvement in the ongoing litigation, while Commissioners Caroline A. Crenshaw and Jaime Lizárraga opposed the motion. The vote report, published by the SEC, confirmed that Uyeda and Peirce approved the action without additional comments, while Crenshaw dissented.
Meanwhile, in a March 27 letter to Maureen Gornik, acting clerk of the Eighth Circuit, SEC Solicitor Tracey Hardin notified the court that the agency had “determined that it wishes to withdraw its defense of the Rules.” Hardin wrote that Commission counsel was “no longer authorized to advance the arguments presented in the Commission’s response brief” and that the SEC would “yield any oral argument time back to the Court or to other parties as the Court determines.” The letter also acknowledged that “a majority of the current Commissioners voted against the rules at issue in this litigation.”
“The goal of [Thursday’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,” Uyeda said in a statement. Uyeda, notably, has been critical of the rule since its adoption, arguing that it imposes undue burdens on businesses while straying from the SEC’s core mission of protecting investors and maintaining efficient markets.
Crenshaw, in a strongly worded dissent, criticized the move as politically motivated and unlawful, warning that “the majority of the Commission is crossing their fingers and rooting for the demise of this rule while they eat popcorn on the sidelines. The court should not take the bait,” she said. She argued the agency was skirting its legal obligations under the Administrative Procedure Act, noting: “There are no backdoors or shortcuts. But that is exactly what the Commission attempts today.”
While the SEC is no longer defending its rules, it remains unclear how courts will proceed with Iowa v. SEC. While challengers may claim victory by default, legal experts suggest courts could still rule on whether similar regulations fall within the SEC’s statutory authority.
Crenshaw on Thursday argued that by its letter to the court, the SEC is “apparently letting the Climate-Related Disclosures Rule stand but are withdrawing from its defense in court.” This leaves “other parties, including the court, in a strange and perhaps untenable situation,” she said. The SEC should do its job, she urged. “It should defend its existing rule in litigation. If the agency chooses not to defend that rule, then it should ask the court to stay the litigation while the agency comes up with a rule that it is prepared to defend (be it by rescission or otherwise, but certainly in accordance with APA mandates). At the very least, if the court continues without the Commission’s participation, it should appoint counsel to do what the agency will not – vigorously advocate in the litigation on behalf of investors, issuers and the markets.”
—Sonal Patel is a POWER senior editor (@sonalcpatel, @POWERmagazine).
