The Securities and Exchange Commission on Friday proposed to repeal a contentious rule that would have required thousands of companies to disclose the risks they face from a warming planet and how their operations contribute to climate change.
The rule was already on hold pending litigation. In February, Mark Uyeda, then the acting chairman of the S.E.C., directed the agency to stop defending the regulation in court against lawsuits from business groups and Republican-led states.
Still, the proposed rollback was a victory for a range of business interests that had lobbied to kill or weaken the regulation, including airlines, oil and gas drillers, farmers, retailers and truckers. It was a blow to climate activists and some corporations that had embraced environmental, social and governance principles, known as E.S.G., in recent years.
The rule was issued under the previous S.E.C. chairman, Gary Gensler, who was nominated by President Joseph R. Biden Jr. Paul Atkins, who was nominated by President Trump and sworn in as the commission chairman last month, said in a statement on Friday that the rule exceeded the agency’s legal authority.
The rule never actually took effect. Soon after it was finalized in March 2024, the S.E.C. paused its implementation while the legal battles played out. Then came Mr. Uyeda’s directive to stop defending the rule in court altogether.
If it had gone forward, the rule would have required all publicly traded companies to disclose whether they faced significant risks from climate change and its effects, including more frequent and more severe floods, wildfires and hurricanes. For example, a hotel chain would have had to inform investors of risks to waterfront properties from rising seas and storm surges.
In addition, the biggest publicly traded companies would have had to report their emissions of planet-warming greenhouse gases. However, that reporting was required only if the companies considered these emissions “material,” or important to a reasonable investor.
The final version of the rule was weaker than the initial version, which would have required companies to disclose emissions produced by their customers and suppliers. Under that far-reaching requirement, oil companies would have had to report the emissions generated when customers drove their gasoline-powered cars.
The U.S. Chamber of Commerce, the nation’s largest business lobby group, led a legal challenge to the rule. Attorneys general from 25 Republican-controlled states also filed suits. The complaints accused the S.E.C. of overstepping its authority by acting as an environmental regulator rather than a financial one.
Brenna Bird, the Iowa attorney general, also argued that the rule was part of President Joseph R. Biden Jr.’s “radical green scheme.” (The S.E.C. is an independent agency that does not directly answer to the White House, though Mr. Trump has sought to exert greater control over such agencies.)
“The radical climate mandate imposed by the Biden Securities and Exchange Commission was an outrageous act of overreach,” Ms. Bird said in a statement on Friday. “I am grateful the S.E.C. is taking the important step to kill this.”
The Chamber of Commerce welcomed the move, too. Mike Flood, the senior vice president of the Center for Capital Markets Competitiveness at the chamber, said in a statement that the group was “encouraged” by the proposed rollback.
“The S.E.C.’s climate disclosure rule would have far-reaching negative effects on the U.S. economy and further disincentivize companies from going public in the United States,” he said.
Climate activists sharply criticized the commission for abandoning the rule, which many considered a signature achievement of Mr. Gensler’s.
“By rescinding this rule, the S.E.C. is turning its back on the investors it exists to protect,” Andrew Behar, the chief executive of As You Sow, an environmental advocacy group, said in a statement. “This action treats the material financial risk of climate change that harms every American as nothing more than fulfillment of a campaign promise to the fossil fuel industry.”
A similar rule is newly in effect in California, the most populous state in the country, regardless of the rollback at the federal level. The Climate Corporate Data Accountability Act, which was signed into law in October 2023 by Gov. Gavin Newsom, a Democrat, requires the disclosure of greenhouse gas emissions by both public and private U.S.-based companies that do business in the state. The first disclosures are due by Aug. 10.
In addition, 41 other countries have approved or proposed climate disclosure rules, according to the International Sustainability Standards Board, a multinational body. Together, these countries account for about 60 percent of the world’s gross domestic product.
“Even with the S.E.C. rule being rescinded, there are other disclosure requirements that are likely going to apply to public companies,” said Heather M. Palmer, a partner at the law firm Sidley Austin who specializes in E.S.G. matters.
The S.E.C. will solicit public comments on the proposed rollback for 60 days. Then the agency will finalize the proposal, likely within the next year or two.
