On March 27, 2025 the US Securities and Exchange Commission (SEC) voted to stop defending rules adopted in 2024 (during the Biden administration) that would have required selected “public companies” (i.e, listed on national securities exchanges) to provide “climate-related disclosures for investors” in their registration statements and annual reports. SEC had stayed these rules’ effectiveness after being sued by two energy companies, which were later joined by other plaintiffs as well as state and nonprofit supporters of the rules. The latest SEC decision ends the agency’s defense in that litigation.
What reporting would the rules have required?
As I wrote about in more detail when the rules were adopted (see HERE), these rules were designed to require disclosure of the following:
- any climate-related risks that have materially impacted or are reasonably likely to have a material impact on the registrant, including on its strategy, business model, results of operations, financial condition, and outlook;
- specified disclosures, regarding any registrant’s activities to mitigate or adapt to a material climate-related risk or use transition plans or other methods to manage a material climate-related risk;
- any oversight by the registrant’s board of directors of climate-related risks
- any role by management in assessing and managing material climate-related risks;
- any processes used to assess or manage material climate-related risks; and
- any targets or goals that have materially affected or are reasonably likely to materially affect the registrant’s business, results of operations, or financial condition.
SEC would have required a qualifying registrant (both domestic and foreign private issuers) to:
- provide the climate-related disclosure in its registration statements and annual reports;
- provide mandated climate-related disclosure in a separate, appropriately captioned section of its registration statement or annual report, or incorporate that information in a separate, appropriately captioned section by reference from another section (such as Risk Factors, Description of Business, or Management’s Discussion and Analysis (MD&A)) (Regulation S-K);
- provide mandated climate-related financial statement financial impact metrics, expenditure metrics, and financial estimates and assumptions metrics and related disclosure (Regulation S-X);
- electronically tag both narrative and quantitative climate-related disclosures in Inline XBRL (eXtensible Business Reporting Language) in reports required to be electronic; and
- file rather than furnish the climate-related disclosure (triggering potential liabilities for misleading or false filings).
These requirements were scheduled to be phased in, beginning with the largest companies.
What happens next?
Although SEC has notified the court that it is withdrawing its participation in the litigation, states and other interveners who have been supporting the rules have moved to freeze the litigation. Although the Eighth Circuit could do so, leaving the matter on hold until a future SEC might reinstate it, it seems more likely that the case will end. It also seems likely that the current SEC commissioners will vote to withdraw the rules altogether.
Note that the withdrawal of these rules would not affect other governmental requirements or recommendations, or market-driven disclosures. For example, the Canadian Sustainability Standards Board (CSSB) has published its final Canadian Sustainability Disclosure Standard (CSDS) in December 2024; Canadian jurisdictions may choose to require reporting using the CSDS. As another example, CDP (formerly known as the Carbon Disclosure Project) provides voluntary reporting standards used around the world.
Self-Assessment Checklist
Is the organization a “public company” subject to SEC reporting requirements?
Whether or not a public company, does the organization provide formal disclosures to shareholders, regulators, market or non-profit reporting organizations, or other stakeholders?
Has the organization assessed potential impacts of climate change on its activities and investments?
- If so, has the organization quantified any of these impacts, and assessed whether they are or woold be material to its operations and results?
- If so, is the organization undertaking efforts to adapt to these impacts by reducing negative impacts and enhancing positive impacts?
Has the organization identified which of these activities and investments are presently or potentially insured for climate-related impacts?
Where can I go for more information?
- SEC
- March 27, 2025 press release
About the Author
Jon Elliott is President of Touchstone Environmental and has been a major contributor to STP’s product range for over 30 years.
Mr. Elliott has a diverse educational background. In addition to his Juris Doctor (University of California, Boalt Hall School of Law, 1981), he holds a Master of Public Policy (Goldman School of Public Policy [GSPP], UC Berkeley, 1980), and a Bachelor of Science in Mechanical Engineering (Princeton University, 1977).
Mr. Elliott is active in professional and community organizations. In addition, he is a past chairman of the Board of Directors of the GSPP Alumni Association, and past member of the Executive Committee of the State Bar of California's Environmental Law Section (including past chair of its Legislative Committee).
You may contact Mr. Elliott directly at: tei@ix.netcom.com