SEC Proposes To Rescind Climate Disclosure Regulation

On Friday, May 29, the U.S. Securities and Exchange Commission (SEC) formally proposed to rescind its 2024 regulation that would have required all publicly traded companies to outline for investors the ways in which climate change poses significant risks to their business.

As The Hill explained, the rule, issued during the Biden administration, also would have required these companies to disclose information about greenhouse gas emissions directly caused by their business if that information would be likely to influence a person’s decision about whether or not to invest in the company.

Current SEC leadership argued that, in issuing the regulation, the Biden administration commission exceeded its statutory authority. Even if the SEC had authority to adopt such the regulation, the Trump administration SEC commissioners said they believe there are independent, compelling policy reasons to rescind the rule, including that the regulation:

• Is unnecessary and inconsistent with a registrant-specific, materiality-based approach to disclosure that best serves the interests of registrants and investors;
• Is well beyond the policy concerns of the federal securities laws;
• Imposes substantial costs on public companies and their shareholders that are not justified by the informational benefits they may provide to some investors; and
• Is at odds with the SEC’s policy objectives of facilitating capital formation and promoting public company status.

“SEC disclosure obligations should comply with the Commission’s statutory authority, be guided by materiality as the North Star, avoid the practical effect of dictating corporate behavior, and be imposed only when the expected benefits justify the likely costs and burdens,” SEC Chair Paul Atkins concluded.