Federal Climate Disclosure Is Fading, But The Obligations Are Not

The Securities and Exchange Commission (SEC) has formally initiated the process of withdrawing its 2024 climate-risk disclosure regulation (“The Enhancement and Standardization of Climate-Related Disclosures for Investors,” the “Rule”), which was adopted during the Biden administration. On May 4, 2026, the SEC submitted a rescission proposal to the Office of Information and Regulatory Affairs, marking the first concrete procedural step toward formal elimination of the Rule.

The Rule has had a lengthy and contentious history. Proposed in 2022, it took nearly two years to reach final approval by a narrow 3-2 vote. As finalized, it would have required certain public companies to disclose climate-related risks with potential material impacts and describe any climate mitigation strategies. In addition, the Rule would have required large accelerated filers and accelerated filers to phase in reporting of Scope 1 and Scope 2 greenhouse gas emissions; a proposed requirement to report Scope 3 emissions was eliminated from the final version. Large accelerated filers are generally companies with a market float (the total market value of shares available for public trading, excluding those held by insiders) of $700 million or more, while accelerated filers are those with a market float of between $75 million and $700 million. Smaller reporting companies, emerging growth companies, and non-accelerated filers would have been exempt from the emissions reporting requirements, though they remained subject to other disclosure obligations under the Rule.

The Rule faced immediate and numerous legal challenges after adoption, which were consolidated in the Eighth Circuit Court of Appeals. Following the change in administration, the SEC distanced itself from the Rule and ultimately ceased defending it in court. The Eighth Circuit then stayed the litigation and made clear that it was the SEC’s responsibility to rescind, repeal, modify, or resume its defense of the Rule, which led directly to the current rescission effort.

Even if the Rule is formally withdrawn, many companies still face climate-related disclosure obligations pursuant to other laws such as California’s Climate Disclosure Laws. California's Senate Bill 253 requires companies doing business in California with annual gross revenues exceeding $1 billion to publicly disclose their Scope 1, Scope 2, and Scope 3 greenhouse gas emissions. California’s Senate Bill 261 applies to companies doing business in California with annual gross revenues exceeding $500 million and requires reporting on climate-related financial risks. However, SB 261 is currently under review by the Ninth Circuit and is subject to a stay pending the outcome of that litigation.

Although the scope and timing of companies’ disclosure obligations remain in flux, prudent companies should monitor their reporting obligations and ongoing developments closely.

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