climate – Duane Morris on Capital Markets

By Driscoll R. Urgate

On May 29, 2026, the SEC voted unanimously to propose rescinding in their entirety the climate-related disclosure rules adopted by a 3-2 vote in March 2024 (the Climate Rules). Chairman Paul Atkins framed the action around materiality, stating that SEC disclosure obligations should be “guided by materiality as the North Star” and “imposed only when the expected benefits justify the likely costs and burdens.”

The Climate Rules, which would have mandated reporting on climate risks, Scope 1 and 2 greenhouse gas emissions, transition plans, and financial statement footnotes for severe weather events, never took effect. Immediately upon adoption, trade associations, state attorneys general, and business groups challenged the Climate Rules, with litigation consolidating in the Eighth Circuit (Iowa v. SEC, No. 24-1522). The Commission stayed the Climate Rules on April 4, 2024, and they have remained inoperative since.

Timeline of Key Events

The path to this proposed rescission includes several notable milestones. In February 2025, Acting SEC Chairman Mark Uyeda directed Commission staff to request that the Eighth Circuit refrain from scheduling oral arguments and outlined his concerns about the Commission’s statutory authority to adopt the Climate Rules. On March 27, 2025, the Commission voted to withdraw its defense of the Climate Rules, with Commissioner Caroline A. Crenshaw dissenting. Following the SEC’s withdrawal, a coalition of 18 states and the District of Columbia intervened to uphold the Climate Rules. On September 12, 2025, the Eighth Circuit issued an order holding the consolidated petitions for review in abeyance until such time as the Commission reconsidered the Climate Rules through notice-and-comment rulemaking or renewed its defense.

The Commission has now taken the step contemplated by that order, proposing to rescind the Climate Rules through a formal notice-and-comment rulemaking.

Meanwhile, climate disclosure requirements continue to advance at the state level. In February 2026, the New York State Senate passed the Climate Corporate Data Accountability Act, which is legislation modeled in significant respects on California’s climate disclosure laws. The bill remains pending before the New York Assembly.

Rationale for Rescission

The Commission now believes the 2024 Climate Rules “were a dramatic overreach of the Commission’s statutory authority and, independently, unsound as a matter of policy.” Even assuming it had authority to adopt the Climate Rules, the Commission identifies independent policy grounds for rescission: the Climate Rules are inconsistent with a registrant-specific, materiality-based disclosure framework; they stray beyond the policy concerns of the federal securities laws; they impose substantial costs not justified by informational benefits; and they conflict with the Commission’s objectives of facilitating capital formation and promoting public company status.

Commissioner Uyeda, in his supporting statement, emphasized that the concept of materiality, including as it relates to climate change, is already well embedded in the SEC’s existing disclosure obligations, whether in the description of the business, risk factor disclosure, management’s discussion and analysis, financial statements, or notes thereto. He characterized the Climate Rules as “a rule to influence how a business operates hidden under a cloak of disclosure.”

Commissioner Hester Peirce likewise supported the proposal, noting that adherence to a merit-neutral, materiality-centered disclosure framework is consistent with both the SEC’s statutory authority and the healthy functioning of U.S. capital markets. The Commission’s proposing release, Release No. 33-11421, sets forth the legal and policy bases for rescission in detail.

Next Steps

The public comment period will remain open for 60 days following publication of the proposing release in the Federal Register. Given that the original 2022 climate proposal generated more than 16,000 public comments, a similarly robust comment process is anticipated. After reviewing public comments, the Commission would be required to vote again before the rescission could become final.

In the meantime, the Climate Rules remain in place and have never been operative. As discussed in the accompanying Client Alert, companies should not assume that the absence of federal climate disclosure mandates means the end of climate-related reporting obligations. California’s SB 253 and SB 261, New York’s proposed Climate Corporate Data Accountability Act, the European Union’s Corporate Sustainability Reporting Directive, and various international standards under the International Sustainability Standards Board framework continue to advance. As a result, many public and private companies may remain or become subject to climate-related reporting obligations regardless of what the SEC ultimately does.

We will continue to monitor developments and provide updates as the SEC’s rulemaking process unfolds. Read a more detailed analysis of this update on the Duane Morris LLP website.

On March 21, 2022, the Securities and Exchange Commission proposed, in a 510-page release, rule changes that would require registrants to include certain climate-related disclosures in their registration statements and periodic reports, including information about climate-related risks that are reasonably likely to have a material impact on their business, results of operations, or financial condition, and certain climate-related financial statement metrics in audited financial statements. The required information about climate-related risks also would include disclosure of a registrant’s greenhouse gas emissions. The commissioners voted on party lines to approve the proposal on a three to one vote.

SEC Chair Gary Gensler commented that “if adopted, [the rule changes] would provide investors with consistent, comparable, and decision-useful information for making their investment decisions, and it would provide consistent and clear reporting obligations for issuers.” Mr. Gensler believes that the proposal would help issuers more efficiently and effectively disclose climate risks and meet investor demand and that “companies and investors alike would benefit from the clear rules of the road proposed in the release.”

Republican SEC Commissioner Hester Peirce voted against the proposal and issued a dissenting statement. “We are here laying the cornerstone of a new disclosure framework that will eventually rival our existing securities-disclosure framework in magnitude and cost, and probably outpace it in complexity,” Ms. Peirce said. She also warned that the proposed rules will enrich “the climate-industrial complex” while hurting investors, the economy and the SEC.

The proposed rule changes would require a registrant to disclose information about:

the registrant’s governance of climate-related risks and relevant risk management processes;
how any climate-related risks identified by the registrant have had or are likely to have a material impact on its business and consolidated financial statements, which may manifest over the short-, medium-, or long-term;
how any identified climate-related risks have affected or are likely to affect the registrant’s strategy, business model, and outlook; and
the impact of climate-related events (severe weather events and other natural conditions) and transition activities on the line items of a registrant’s consolidated financial statements, as well as on the financial estimates and assumptions used in the financial statements.

For registrants that already conduct scenario analysis, have developed transition plans, or publicly set climate-related targets or goals, the proposed amendments would require certain disclosures to enable investors to understand those aspects of the registrants’ climate risk management.

In what is likely to be a more burdensome and costly disclosure requirement, the proposed rules also would require a registrant to disclose information about its direct greenhouse gas (GHG) emissions (Scope 1), indirect emissions from purchased electricity or other forms of energy (Scope 2), and GHG emissions from upstream and downstream activities in its value chain (Scope 3). Disclosure of Scope 3 emissions would be mandatory only if output of GHG is material, or significant to investors, or if companies outline specific targets for them. According to the SEC, these proposals for GHG emissions disclosures would provide investors with decision-useful information to assess a registrant’s exposure to, and management of, climate-related risks, and in particular transition risks. Adding to the cost of these requirements, accelerated filers and large accelerated filers would be required to include an attestation report from an independent attestation service provider covering Scopes 1 and 2 emissions disclosures.

The proposing release will be open for public comment for a relatively short period of 30 days after publication in the Federal Register, or 60 days after the date of issuance and publication on sec.gov, whichever period is longer.

Tag: climate

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