The U.S. Securities and Exchange Commission (SEC) has formally stepped back from defending one of its most ambitious recent rulemakings—its 2024 mandate for climate-related risk and greenhouse gas (GHG) disclosures. In a letter filed with the U.S. Court of Appeals for the Eighth Circuit on March 27, 2025, the agency announced it would no longer defend its controversial rule in State of Iowa et al. v. SEC, No. 24-1522.
This unexpected move signals a major shift in federal climate policy and adds more complexity to an already fractured regulatory environment. While the rule technically remains on the books, its future remains uncertain as states, companies, and courts consider their next steps.
SEC Retreats from Legal Defense After Intense Backlash
The rule, originally finalized on March 6, 2024, required public companies to include detailed climate-related risks and greenhouse gas emissions data in their registration statements and annual reports. However, legal challenges from 10 Republican-led states and business groups quickly followed.
These opponents claimed the rule exceeded the SEC’s statutory authority under the Securities Exchange Act 1934. They argued that climate data is not inherently “material” to investment decisions and that existing disclosure standards cover financially relevant environmental risks. They also accused the SEC of acting arbitrarily by failing to justify why current disclosure frameworks were insufficient.
Even before the rule appeared in the Federal Register, the Fifth Circuit granted a stay, halting its implementation. The SEC later voluntarily paused the rule as of April 12, 2024, recognizing the growing legal pressure.
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Intervenor States Push to Defend the Rule
Despite the SEC’s retreat, the rule hasn’t been left undefended. Eighteen states and the District of Columbia filed a successful motion in April 2024 to intervene as respondents supporting the climate disclosure mandate.
These states argued that the SEC does have the authority to require climate-related reporting because such data holds clear financial relevance in modern investment analysis. They highlighted the agency’s long-standing efforts to guide climate disclosure and emphasized the growing investor demand for standardized environmental data.
Although the SEC has now withdrawn from the case, the court has not restricted the rights of these intervenors to continue defending the rule. Their participation keeps the case alive, even without the agency that originally authored the regulation.
SEC Cites Lack of Authority and Expertise
The SEC first hinted at its withdrawal in a statement from Acting Chairman Mark Uyeda on February 11, 2025. In that letter, Uyeda asserted that the agency lacked the “statutory authority or expertise” to regulate climate-related matters. He requested the court postpone oral arguments, foreshadowing the agency’s full retreat in March.
This statement aligned with the views of the current SEC majority, which now opposes the rule. Still, the agency has not formally repealed it—a process that requires an entirely new rulemaking procedure under the Administrative Procedure Act (APA).
What Happens to the Rule Now?
The SEC’s decision to abandon the case leaves the rule’s legal status in limbo. The Eighth Circuit must now decide whether to proceed with oral arguments, issue a decision based on existing filings, or remand the case back to the agency.
While the SEC will no longer defend the rule, it hasn’t revoked it either. Since it remains officially adopted, any attempt to repeal or revise it must follow the APA’s rulemaking process, including public notice, comment periods, and a detailed administrative record.
Thanks to the Supreme Court’s 2024 ruling in Loper Bright Enterprises, which limited judicial deference to agency interpretations, regulatory changes now face tougher scrutiny. The SEC must provide substantial evidence and legal reasoning to justify reversing the climate disclosure rule.
Public Companies Face Compliance Confusion
Public companies face an increasingly complex compliance environment as the legal drama unfolds. The SEC’s rule remains on pause indefinitely, and many corporations are unsure how to proceed.
Meanwhile, several states—notably California—have enacted climate disclosure mandates. At the same time, European regulators continue to advance ESG (Environmental, Social, and Governance) reporting requirements under frameworks like the Corporate Sustainability Reporting Directive (CSRD).
Companies must now craft disclosure strategies that satisfy overlapping, and sometimes conflicting, state, federal, and international laws. The threat of enforcement remains, particularly from states that view ESG reporting as politically motivated or hostile to certain energy sectors.
Regulatory Uncertainty Grows for ESG Reporting
The SEC’s retreat reflects growing political divisions over ESG policies and environmental governance. While investors increasingly demand consistent climate-related data, U.S. regulators remain divided on how—or whether—to enforce such requirements.
The current SEC majority appears unwilling to advance climate-focused rules without stronger congressional support. However, the rule’s existence, coupled with state-led efforts and global reporting frameworks, ensures that climate disclosure remains a major pressure point for corporate America.
Conclusion: The Rule Is Stuck, and So Are Public Companies
By abandoning its climate disclosure rule, the SEC has confused the legal and compliance landscape more than ever. Although the rule technically still exists, the agency’s refusal to defend it leaves the responsibility in the hands of intervenors and the courts.
Public companies now face a patchwork of regulatory expectations and a long road ahead. Without a clear federal standard, businesses must weigh the risks of enforcement, reputational damage, and investor dissatisfaction as they decide how to disclose climate-related risks in the future.
