SEC’s Climate Disclosure Rule Deeply Flawed, Could Harm Economy: Acting Chairman

The U.S. Securities and Exchange Commission in Washington on Sept. 18, 2008. Chip Somodevilla/Getty Images

The U.S. Securities and Exchange Commission’s (SEC’s) climate disclosure rule for businesses is deeply flawed and could pose a broader risk to the U.S. economy, SEC Acting Chairman Mark T. Uyeda said in a Feb. 11 statement.

In March 2024, the SEC finalized a rule requiring publicly traded companies to disclose any climate-related risks affecting their business. Companies were required to report the expected impact of these risks on their financial condition and the strategies implemented to mitigate them. They also had to disclose their climate targets and any losses incurred due to severe weather incidents.

A flurry of legal challenges followed, including from Republican states. The lawsuits were consolidated into a single case, with the U.S. Court of Appeals for the Eighth Circuit chosen to oversee the litigation.

In April 2024, the SEC paused the implementation of the rule as litigation was pending. On Tuesday, Uyeda said he directed commission staff to request the court to “not schedule the case for argument to provide time for the Commission to deliberate and determine the appropriate next steps in these cases.”

“The rule is deeply flawed and could inflict significant harm on the capital markets and our economy. During the comment period, many submissions likewise urged that the Rule not be adopted,” he said.

“Among the reasons were that the Rule would require a large volume of financially immaterial information. Financially material climate-related risks were already subject to disclosure under existing rules, and the proposed rules overstepped the SEC’s regulatory authority.”

When the SEC finalized the rules in March last year, the agency’s commissioners had voted 3–2 to pass the measures, which were made along party lines. Democrat commissioners voted in favor of the rule while Republican commissioners voted against it.

Then-SEC Chair Gary Gensler justified the rule at the time, saying the new disclosure requirements offer investors “consistent, comparable, and decision-useful information.”

“They will provide specificity on what companies must disclose, which will produce more useful information than what investors see today. They will also require that climate risk disclosures be included in a company’s SEC filings, such as annual reports and registration statements rather than on company websites, which will help make them more reliable,” Gensler said.

Uyeda, who voted against the measure, said at the time that the commission did not have “statutory authority or expertise” to address matters related to social or political issues.

“Before requiring disclosure, the Commission should assess whether the benefits of the information to the reasonable investor outweigh the costs of producing the disclosure,” he said. “Unfortunately, this analysis did not occur for today’s rulemaking. Instead, the Commission ventured outside of its lane and set a precedent for using its disclosure regime as a means for driving social change.”

In his Feb. 11 statement, Uyeda said that the SEC intends to “promptly notify” the court about its stance on the litigation.

Reactions to Rule’s Pause

Ben Cushing, sustainable finance campaign director at environmental group Sierra Club, criticized Uyeda’s court request to halt scheduled arguments in the climate disclosure case.

He said that rescinding the rule would be a “significant setback” that risks isolating the United States internationally as climate-related financial risks keep growing.

“The climate crisis and the transition to net zero are already reshaping the economy, and jurisdictions from California to the European Union to countries across Asia are moving forward with disclosure requirements — meaning that many companies will report this information regardless,” he said. “The SEC’s retreat will only make capital markets less efficient and allow corporate polluters to conceal risks from investors.”

Sen. Mike Rounds (R-S.D.) welcomed the SEC decision, saying in a Feb. 11 post on social media platform X that “common sense is winning again.”

“The SEC’s overreaching climate rule would have burdened farmers, ranchers and small businesses with costly reporting requirements and red tape. I’m glad to see it revoked today,” he said. “This helps to Make America Great Again.”

Uyeda said in his Feb. 11 statement that factors such as President Donald Trump’s recent memorandum regarding regulatory freeze “bear on the conduct of this litigation.”

The Jan. 20 memorandum ordered executive departments and agencies not to propose or issue “any rule in any manner” until a department or agency head appointed or designated by Trump in his second term reviews and approves the rule.

The effective date of rules that have already been issued but have not yet taken effect should be considered for postponement to allow time for their review, the memo stated.

Former SEC Chair Gensler resigned on Jan. 20, coinciding with the inauguration of Trump. The president nominated former SEC commissioner Paul Atkins to head the agency. Until Atkins is confirmed by the Senate, Uyeda will temporarily lead the SEC.