SEC Withdraws Defense of Climate Disclosures Rule
By Sarah Hill, April 24, 2025
Did the U.S. Securities and Exchange Commission just remove “security” from their rulemaking?
In the beginning of 2024, Change the Chamber National Climate Fellows published a blog post about the proposed Securities and Exchange Commission (SEC) Climate-Related Disclosures Rule and the pushback the rule faced. Some groups considered the SEC’s climate-related risk proposal (The Enhancement and Standardization of Climate-Related Disclosures for Investors) a win as it would require public companies’ disclosure reporting of Scope 1 and 2 emissions, among other climate-related financial risks. However, before finalizing the rule, the SEC allowed for a public comment period where tens of thousands of comments were submitted. Despite the International Sustainability Standards Board's preference for disclosing Scope 3 emissions and European Union requirements to include Scope 3 reporting for big businesses, the SEC dropped Scope 3 reporting requirements from the proposal, leading to the frustration of many advocates for a strengthened rule.
The fact that the SEC received such a substantial level of public input before proposing a final rule makes the most recent SEC action, or lack thereof, regarding the Climate Disclosures rule even more outrageous. A number of large organizations opposed to the rule filed lawsuits after the final proposal was issued, ultimately resulting in a court case on the rule being brought forward to the U.S. Court of Appeals 8th Circuit. The change from the Biden to the Trump Administration understandably led to a shift in the priorities of the SEC. However, ending the defense of its own proposed rule is a significant leap for the agency that is intended to act independently of each presidential administration.
In response, State Attorneys General filed, seeking to hold the cases in abeyance (pause) and thereby put pressure on the SEC to clarify what its process is. Given the amount of public input that went into the rulemaking for the SEC Climate-Related Risk Disclosure Rule, the SEC withdrawing its defense of the rule at the very least deserves a public explanation. The states that requested the case be put on hold are attempting to follow, and ensure the SEC follows, the procedure for rulemaking that has been historically set and adhered to. It is a reasonable request for the SEC to follow its established procedure for rulemaking before it pulls down its rule. The Eighth Circuit seems to agree as the state Attorney General’s motion to hold the case in abeyance was granted.
What will or should happen from here is uncertain. The court case may proceed with another party assigned the role of defending the SEC’s Climate-Related Risk Disclosure rule, or a new rulemaking process may start within the SEC so that a similar opportunity for public input is provided. In either case, this would ensure the rule is not simply abandoned after the entire rulemaking process was followed, which, as Commissioner Crenshaw said in a statement, is unlawful.
There is not much action individuals can currently take to ensure the SEC does not just withdraw its defense of the rule beyond asking the Commission to abide by its rulemaking procedures and request public comments on the withdrawal of its rule. An important step for individuals is to read and share what Commissioner Crenshaw said in her statement linked above. As she said, the actions of the SEC withdrawing its defense is “but one symptom of a much larger problem” – and I would go on to say that is a problem we need to address and one that is not just limited to the Securities and Exchange Commission.
Change The Chamber is a nonpartisan coalition of young adults, 100+ student groups across the country, environmental justice and frontline community groups, and other allied organizations.