The U.S. Securities and Exchange Commission (SEC) has formally advanced its plan to scrap the 2024 climate disclosure rule, submitting a proposal titled “Rescission of Climate-Related Disclosure Rules” to the White House Office of Management and Budget (OMB) for review. This move marks another significant shift in the agency’s stance on environmental, social, and governance (ESG) reporting, raising questions about the future of investor protections and market transparency.
Background: The 2024 Climate Disclosure Rule
In early 2024, the SEC enacted a landmark rule requiring publicly traded companies to disclose climate-related risks, greenhouse gas (GHG) emissions, and the financial impact of extreme weather events. The rule was designed to give investors consistent, comparable data to assess long-term climate risks and to align U.S. markets with global reporting standards. It mandated Scope 1 and Scope 2 emissions reporting for most large companies, with Scope 3 emissions (supply chain) under certain conditions.
Why the SEC is Rescinding the Rule
The current SEC leadership, under political pressure and facing legal challenges, has argued that the 2024 rule imposes excessive compliance costs on businesses. The proposed rescission notice—submitted to OMB for interagency review—signals the agency intends to formally withdraw the rule, effectively ending mandatory climate disclosures. Critics contend the move prioritizes corporate convenience over investor needs, especially as climate risks become increasingly material to financial performance.
Impact on Investors and Market Transparency
Investor advocacy groups have condemned the rescission, stating it undermines decades of progress in investor protection. Without standardized climate data, shareholders will struggle to evaluate companies’ exposure to regulatory changes, physical risks like floods or wildfires, and transition risks tied to a low-carbon economy. The North American Investors for Climate Transparency coalition warned this “retreat” leaves investors reliant on voluntary, inconsistent reports.
Comparison to Global Standards
The SEC’s move contrasts sharply with international developments. The European Union’s Corporate Sustainability Reporting Directive (CSRD) now mandates detailed climate disclosures for all large companies operating in the EU, while the International Sustainability Standards Board (ISSB) has issued global baseline standards. U.S. companies subject to EU rules may still need to comply, creating a fragmented reporting landscape. The SEC’s decision risks leaving American investors at a disadvantage, unable to compare domestic firms with foreign competitors.
Legal and Political Context
The original rule faced immediate lawsuits from business groups and Republican-led states, who argued the SEC overstepped its authority under the Securities Exchange Act of 1934. The rescission proposal appears to settle those challenges, but it may trigger new litigation from environmental and consumer groups. Political observers note the reversal aligns with the current administration’s broader deregulatory agenda, though the SEC Chair has maintained that investor protection remains the agency’s “North Star.”
What Happens Next
The OMB review typically takes 30 to 90 days. After approval, the SEC will publish the proposed rescission in the Federal Register, opening a public comment period. Final adoption could occur in late 2025 or early 2026. Meanwhile, companies that already began building climate reporting systems may face stranded costs, and investors should prepare for a return to voluntary disclosure regimes.
Conclusion: A Step Backwards for Transparency
The SEC’s move to rescind the climate disclosure rule represents a clear retreat from investor-focused regulation. While supporters argue it reduces corporate burden, critics point out that hiding climate risks does not make them disappear—it simply shifts the burden to investors who must rely on less reliable information. As global markets move toward mandatory climate reporting, the U.S. risks falling behind, leaving both investors and the environment worse off. For now, stakeholders should monitor OMB proceedings and consider submitting public comments when the rule is formally proposed.
For more on climate disclosure standards, see our analysis of global reporting frameworks and investor implications.