On March 27, 2025, the U.S. Securities and Exchange Commission (SEC) announced that it had voted to end its defense of the final rules on the enhancement and standardization of climate-related disclosures for investors (the climate rules). This decision follows significant opposition to the climate rules from congressional leaders, trade associations, state attorneys general, and other business entities.
On March 6, 2024, the SEC adopted climate rules that would have required domestic and foreign registrants to include extensive climate-related information in their registration statements and periodic reports. Shortly after the SEC’s adoption of the climate rules, following legal challenges consolidated in the U.S. Court of Appeals for the Eighth Circuit (Eighth Circuit) (Iowa v. SEC, No. 24-1522 (8th Cir.)), the SEC issued a voluntary stay of the climate rules. As a result of the stay, the climate rules have never gone into effect.
The withdrawal of the SEC’s defense of the climate rules does not necessarily mean the end of the rules. The Eighth Circuit could still rule on the legal challenges to the rules, and if so could decide to uphold the rules in whole or in part or remand them to the SEC for further consideration. However, the SEC’s action does confirm the expected shift in the agency’s approach to climate-related disclosures under the Trump Administration.
Next Steps for Public Companies
The following practical guidance is provided for consideration by public companies.
- At the U.S. state level and across the globe, climate-related disclosures are still rapidly proliferating. While it is unlikely that public companies will need to make disclosures under the SEC’s climate rules, many will need to make disclosures under either state climate disclosure laws, such as California SB 253 and SB 261 (as amended by SB 219), or international climate-related disclosure requirements, such as the European Union’s (EU) Corporate Sustainability Reporting Directive (CSRD) and/or Corporate Sustainability Due Diligence Directive (CS3D), or various other international jurisdictions that have, or are in the process of, adopting their own disclosure rules based on the International Sustainability Standards Board (ISSB) framework. For these reasons, we recommend that public companies continue to monitor the applicability of these climate disclosure regimes to their operations and, as necessary, continue to prepare for compliance.
- Monitor U.S. federal legislative and diplomatic efforts on CS3D. On February 26, 2025, members of the U.S. Congress publicly expressed in a letter directed to the U.S. Department of Treasury and National Economic Counsel significant concerns about the EU’s CS3D, and recommended immediate action to safeguard U.S. companies. On March 12, 2025, U.S. Sen. Bill Hagerty of Tennessee, a Republican member of the Senate Banking Committee, introduced the Prevent Regulatory Overreach from Turning Essential Companies into Targets (PROTECT USA) Act of 2025, legislation that, if passed and signed into law, would shield U.S. companies from compliance with CS3D. Public companies should continue to carefully watch these developments as part of their ongoing compliance and monitoring processes.
- Continue to monitor global greenwashing litigation. The global trend toward increased climate-related disclosures comes with a growing rise in disclosure-related litigation. Cases are being brought around the world by governmental authorities, investors, consumers, and non-governmental organizations (NGOs), challenging corporate sustainability statements and environmental marketing claims. New sustainability disclosures will provide an additional source of public information that will likely drive a further increase in disclosure-related litigation. Companies must weigh these risks as they meet their new disclosure requirements. These risks are more pronounced when companies are subject to disclosures across jurisdictions, placing a premium on transparency and consistency, wherever appropriate.
