SEC Proposes Rescinding Climate Disclosure Rule, Ignoring Process
NEWS & RESEARCH
In May 2026, the Securities and Exchange Commission (SEC) proposed rescinding a rule from the Biden administration that would have required publicly traded companies to disclose their greenhouse gas emissions and the climate-related risks facing their business—for example, if a beachside hotel chain faced financial exposure from rising sea levels. The rule was designed to give investors standardized, comparable information about how climate change could affect the companies they invest in. The rule faced legal challenges from the outset, as the US Chamber of Commerce, business groups, and 25 Republican-led states sued to block it, while environmental groups filed separate suits arguing that the rule did not go far enough. The Trump administration directed the SEC to abandon its defense of the rule entirely and then asked the judge to rule on the regulation's legality even though the government had stopped participating in the case. A court decision striking down the rule would have bound future administrations as well, whereas a rescission by the agency itself could later be reversed. The court declined to rule on the legality of the disclosure rule, ordering the SEC to either defend the rule or rescind it. The SEC chose the latter.
SOURCES: New York Times | Harvard Law | Washington Post | Sierra Club
ANALYSIS & OPINION
This rule’s rescission is expected to hurt investors, who will be left in the dark on climate-related data that directly impacts companies' bottom lines. It also creates an unintended burden for businesses: without a uniform federal standard, companies must navigate a patchwork of state-level disclosure requirements that can be costly and complex. The rescission faces serious legal questions as well: the Biden-era SEC spent years building an 885-page record that includes over 24,000 public comments and establishes why climate risk matters to investors. Arbitrarily rescinding the rule without proper legal explanation would violate the Administrative Procedure Act—making legal challenges widely anticipated if the rescission is finalized. The process itself raises further concerns: the SEC first attempted to bypass standard rulemaking by asking a judge to rule on the regulation's legality after having already abandoned its own defense, an irregular shortcut the court promptly rejected. When the SEC finally voted to rescind, the proposal passed 3-0—but all three commissioners were Republican. The commission is designed to have five seats, at least two of which must belong to Democrats, but Trump has intentionally left those vacancies open, thereby ensuring unanimous votes with no dissenting opinions on the record. The case also carries implications well beyond climate policy: the SEC claims it lacks statutory authority to require climate disclosures because such power was not explicitly named in its founding laws from the 1930s—but the SEC has long required disclosures on topics nowhere in those original statutes, including cybersecurity risks, supply chain exposures, and executive diversity. By aggressively narrowing its own authority, the commission hands opponents of corporate disclosure a far broader weapon.
SOURCES: Sabin Center for Climate Change Law | Harvard Law | Clark Hill | Clean Air Task Force | Better Markets | Holland & Knight | DLA Piper
HOW TO FIX IT
Federal action:
Pass the Climate Risk Disclosure Act—legislation that would directly require the SEC to mandate climate risk disclosures from public companies. Unlike the rescinded rule, a congressional statute cannot be undone by a future administration through rulemaking alone.
State action:
Pass state-level climate disclosure legislation. California has led the way with two laws: the Climate Corporate Accountability Act, which requires public and private companies with over $1 billion in annual revenue doing business in the state to disclose their emissions, and the Climate-Related Financial Risk Act, which requires companies with over $500 million in revenue to report climate-related financial risks annually. Other states should follow suit—New York's Senate has already passed a similar bill, and disclosure legislation has been introduced in New Jersey, Illinois, Washington as well.
Litigation:
Iowa v. SEC: The original consolidated case challenging the rule. When the SEC withdrew its defense in 2025, a coalition of 18 Democratic-led states and D.C. stepped in to defend the rule, and then moved to pause proceedings while the SEC determined its next steps. The case remains on hold and is expected to be dismissed once the rescission is finalized.
Further litigation is expected to challenge the rescission if it is adopted.
Legislation: H.R.2570 - Climate Risk Disclosure Act
