SEC Halts Defense of the Climate-Related Disclosures Rule

The U.S. Securities and Exchange Commission (SEC or Commission) has taken a critical step toward dialing back the Climate-Related Disclosures for Issuers Rule (Climate Rule) which was promulgated under the Biden-Harris administration and immediately challenged in litigation. On February 11, 2025, SEC Acting Chair Mark Uyeda issued a statement explaining that he directed SEC staff to request the U.S. Court of Appeals for the Eighth Circuit not to schedule oral arguments on the challenge to the Climate Rule until the Commission decides whether to continue defending it. Although the views of the new administration made this policy reversal foreseeable — if not inevitable — it is still a significant development. Regardless of this policy change, registrants and securities practitioners should be cognizant that existing regulation will continue to apply and require disclosures of material information, events, and risks that fall within environmental, social, and governance (ESG) categories like climate risk.

Background

In March 2024, the SEC adopted the Climate Rule, which would have required registrants to disclose certain climate-related business risks and information in their public filings. The following month, the SEC voluntarily stayed implementation of the new Climate Rule due to several legal challenges to, among other issues, the SEC’s statutory authority to promulgate the Climate Rule; its compliance with the Administrative Procedures Act (APA) in doing so; and the Climate Rule’s alleged infringement on First Amendment protections. The various lawsuits were consolidated before the Eighth Circuit in State of Iowa, et al. v. SEC, No. 24-01522.

In his statement, Acting Chair Uyeda referenced his and fellow Republican SEC Commissioner Hester Peirce’s dissent when the Commission adopted the Climate Rule. At the time, they argued the climate-related disclosure requirements are outside the scope of the Commission’s statutory authority and expertise, and that existing SEC regulations sufficiently required disclosure of the material climate-related information that the new Climate Rule sought to compel. Acting Chair Uyeda also questioned whether the Commission had followed the proper procedures under the APA in adopting the Climate Rule.

Acting Chair Uyeda’s statement also relied on President Trump’s January 20, 2025 Executive Order (EO) instituting a regulatory freeze. In relevant part, the EO instructs all executive agencies and departments to “consider postponing … the effective date for any rules that have been published in the Federal Register, or any rules that have been issued in any manner but have not taken effect, for the purpose of reviewing any questions of fact, law, and policy that the rules may raise.” Acting Chair Uyeda commented that the EO bears on the SEC’s position before the Eighth Circuit and the Commission has a duty to reevaluate the bounds of its statutory authority as it relates to the Climate Rule.

Democratic SEC Commissioner Caroline Crenshaw released a statement the same day criticizing Acting Chair Uyeda’s instruction to the staff as unilateral and “without the input of the full Commission.” Commissioner Crenshaw reiterated her March 2024 position during the adoption of the Climate Rule that the Commission has full and clear authority to require such climate-related rules because they are about risk and in the public interest.

Implications

Acting Chair Uyeda’s instruction to staff comes on the heels of the SEC’s disbanding of its Climate and ESG Task Force in September 2024, and is no surprise given the new Trump administration’s avowed interest in reducing the number of regulations and its aversion, in particular, to governmental regulation of climate change. In addition, President Trump’s nominee to chair the SEC, Paul Atkins, publicly opposed enactment of the Climate Rule. In a comment letter he jointly submitted with other former SEC Chairs and Commissioners during the Climate Rule’s comment period, the former regulators posited that the standard for climate-related disclosures should remain financial materiality, and that the Commission was overstepping its congressionally delegated regulatory authority.

While the proverbial writing is on the wall for the future of the Climate Rule, as well as ESG enforcement and regulation more broadly, registrants should nonetheless take care and continue to monitor their ESG and climate-related disclosures. Existing regulations still require disclosure of material information, events, and risks, and issuers are still subject to enforcement for failure to comply — regardless of the subject matter. This may include continuing disclosure of things like (1) production impact due to natural disasters disrupting supply chains, (2) litigation and enforcement risk stemming from state and foreign ESG regulations, or (3) financial risk as a result of politically motivated consumer boycotts. Moreover, registrants and practitioners should note the SEC has not taken steps to withdraw its 2010 interpretive guidance on climate change, which highlights the specific events related to climate change that may trigger disclosure requirements.

Arnold & Porter continues to monitor policy shifts impacting the market regulators as a result of the change in presidential administration. Please reach out to the authors of this Advisory or your regular Arnold & Porter contact for more information.

© Arnold & Porter Kaye Scholer LLP 2025 All Rights Reserved. This Advisory is intended to be a general summary of the law and does not constitute legal advice. You should consult with counsel to determine applicable legal requirements in a specific fact situation.