SEC climate rule kicks the bucket

After months on life support, the SEC climate rule is finally, officially dead.

The SEC will no longer defend the rule in court, the agency announced on March 27. The rule, which would have required US public companies to make disclosures about their greenhouse gas emissions and how climate risks could affect them, was released in March 2024 and almost immediately faced legal opposition. The SEC put the implementation of the rule on pause while the courts deliberated. But its fate was further called into question when SEC chair Gary Gensler, who spearheaded the rule, resigned following Donald Trump’s election.

This February, acting SEC chair Mark Uyeda instructed SEC attorneys to ask a federal appeals court to delay oral arguments around the rule. In a statement, he described the rule as “deeply flawed” and said it “could inflict significant harm on the capital markets and our economy.”

Caroline Crenshaw, the SEC’s sole Democratic commissioner, decried the SEC’s decision not to defend the rule as “bad governance” and said it would put the court “in a strange and perhaps untenable situation.”

She wrote, “We do not have license to wholesale abandon agency action simply because the now-constituted Commission would not have supported the rule when it passed.” The SEC, she argued, should either continue to defend the rule or rewrite it, and she called upon the courts to appoint attorneys to defend the law if the SEC failed to.

But is it moot? The demise of the SEC climate rule likely won’t have much impact on large companies’ sustainability reporting. Most of them already need to comply with state and EU climate regulations anyway, former SEC commissioner Rob Jackson said during a November webinar on corporate sustainability in the second Trump administration.

Board members told him they wouldn’t change their disclosures in response to changes to the SEC rule “because they know their investors will still be engaged…and because they built the infrastructure necessary to provide those disclosures,” he said.

And earlier this year, KPMG US sustainability leader Maura Hodge told CFO Brew that the SEC climate rule didn’t “have a lot of teeth anymore” when it was introduced last year, and that many of the disclosures required “most companies were doing already anyway.”