On March 27, 2025, the Securities and Exchange Commission (SEC) voted to end its defense of its Enhancement and Standardization of Climate-Related Disclosures for Investors rules in the ongoing Eighth Circuit case Iowa v. SEC. The final rules, adopted by the SEC on March 6, 2024, but which the SEC later stayed and have never taken effect, would require public companies to disclose certain climate-related risks and greenhouse gas emissions in their registration statements and periodic reports.
The adoption of the SEC’s climate disclosure rules in March 2024 led to multiple legal challenges by various states and private parties which were consolidated into a single Eighth Circuit case, Iowa v. SEC. On April 4, 2024, the SEC stayed effectiveness of the rules pending the conclusion of the litigation. On February 11, 2025, acting SEC Chairman Mark Uyeda requested the court to postpone oral arguments in the case, indicating, among other things, that the SEC was “without statutory authority or expertise” to address climate change issues. Six weeks later, on March 27, the SEC notified the court that it would abandon its defense of the climate disclosure rules.
The end of the SEC’s defense does not necessarily mean the end of the rules. The Eighth Circuit may still decide to uphold the rules in whole or in part, or remand them to the SEC for further consideration. The eighteen states and the District of Columbia that intervened in support of the SEC’s defense of the climate disclosure rules generally have the same right as the SEC to defend the rules and will presumably continue to do so.
Meanwhile, a majority of SEC commissioners now oppose the rules and incoming SEC Chairman Paul Atkins has indicated that he supports the SEC’s decision to abandon its defense of the climate disclosure rules, which indicates a shift in the agency’s approach to climate-related disclosures under the Trump Administration. Still, the rules are final and have yet to be repealed. An attempt to change or repeal the rule must comply with the Administrative Procedure Act (APA), which requires justification of the change with substantial facts and legal analysis in an administrative record that is sufficient to withstand scrutiny. Additionally, the deference to agencies eliminated by the overturning of Chevron and the increased burden on agencies justifying changes to rules following the Supreme Court’s decision in Loper Bright Enterprises heighten the difficulty of repealing the rules. Ironically, these same cases were used by opponents of the rules to argue that the SEC lacked authority to issue its climate disclosure rules in the first place.
Nonetheless, as a practical matter, the SEC does not need to repeal the rules to prevent them from taking effect. The SEC can simply prolong the stay of the rules’ effectiveness. Moreover, as long as the rules are not effective, it is unlikely that the SEC’s proposed investment company and investment adviser ESG disclosure rules could take effect. A significant portion of the disclosure obligations proposed under that rulemaking, particularly for funds that consider emissions or climate-related factors, was predicated upon disclosures that would be required under the climate disclosure rules.
The uncertainty surrounding the future of the Eighth Circuit case and the climate disclosure rules poses difficulty for companies who face a patchwork of state-level and international climate disclosure requirements and rising climate disclosure-related litigation. Companies will therefore need to continue to monitor the regulatory requirements posed by state legislation like California’s Climate Corporate Data Accountability Act (SB 253) and Greenhouse Gases: Climate-Related Financial Risk Act (SB 261), which mandate greenhouse gas emissions reporting and reporting of climate-related financial risks for certain companies doing business in California. Many companies will also need to monitor requirements under international climate disclosure regimes such as the European Union’s Corporate Sustainability Reporting Directive (CSRD) and Corporate Sustainability Due Dilligence Directive (CS3D). These directives require companies to disclose environmental risks and identify and develop plans to mitigate environmental harms. And the SEC’s own 2010 guidance regarding climate-related disclosures remains in effect.
Climate disclosure-related litigation is likely to rise with the global tide of increased climate-related disclosure requirements and potential arguments that certain climate-related disclosures should be considered material under existing SEC requirements. This said, companies must weigh litigation risks when developing their disclosure regimes considering the uncertainty around the SEC rules and the disclosure requirements of state and international jurisdictions. At the same time, companies must also weigh the risks of enforcement actions by states that have enacted legislation targeting companies that provide extensive climate disclosures, such as Texas SB 13. Among other actions, SB 13 requires public entities to divest from and avoid contracting with companies that “boycott” or discriminate against oil and natural gas companies through climate disclosure regimes.
Ultimately, even if the SEC’s climate disclosure rules have met their end, companies will have to ensure their climate disclosure methods satisfy an increasingly complex regulatory landscape. Consequently, companies will need to continue monitoring the various regulatory requirements at play in the climate disclosure space.
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