SEC signals intention to dismantle hard-fought climate disclosure rule

US Securities and Exchange Commission (SEC) Acting Chairman Mark Uyeda has reiterated his opposition to the climate disclosure rule and says the SEC’s new commissioners will have to “determine appropriate next steps”.

The move had been expected ever since Donald Trump was reelected in November with an anti-ESG agenda. The climate disclosure rule was published in March 2024 after a close 3-2 vote where then SEC Commissioner Uyeda opposed its adoption. It was immediately challenged in court by Republican states and business groups, forcing the SEC’s then Chairman Gary Gensler to pause its implementation.

“The rule is deeply flawed and could inflict significant harm on the capital markets and our economy,” wrote Uyeda in a statement published on February 11.

SEC composition under Trump

SEC chairpeople are nominated by Presidents, and while Gensler (selected by Joe Biden) was the climate rule’s strongest proponent, Trump’s pick, Paul Atkins (who is still waiting for his confirmation hearing), opposes it.

Of the other four SEC commissioners that make up the SEC, both of those that voted in favour of the climate disclosure rule ended their mandate in recent months. Uyeda, who is serving as Acting Chair until Atkins is confirmed, will remain in his role until 2028, while Hester Peirce, who also voted against the rule, will see her mandate expire this year – giving President Trump a chance to define nearly the entire composition of the Commission.

While several of the Commissioners remain to be appointed, it’s very likely that they will also be against ESG regulations, putting them in a position to dismantle the climate disclosure rule their predecessors fought for over several years.

Until the new SEC is fully formed, Uyeda said that he has notified the Eighth Circuit Court of Appeals, which is handling the consolidated litigation against the climate rule, of the “changed circumstances” and requested it to give the SEC more time to deliberate on the best course of action.

SEC climate rule: a difficult journey

The SEC published its first draft of the climate disclosure rule in March 2022, and spent the following two years sifting through thousands of comments – most of which revolved around Scope 3 emissions disclosures. 

Opponents agreed that because this requirement would create a ripple effect down across companies’ value chains including to SMEs and private firms, it was beyond the SEC’s authority.

In the final rule published in 2024, the requirement to report on Scope 3 emissions had been removed, and much of the rule had been watered down. However, that wasn’t enough to appease conservative market players, who immediately challenged it in court.