SEC Moves to Rescind Climate Disclosure Rule, Reshaping Energy Sector Reporting
The U.S. Securities and Exchange Commission is formally moving to dismantle a key piece of the Biden administration’s environmental, social, and governance (ESG) agenda, signaling a significant shift away from federal climate-risk disclosure mandates for publicly traded companies. This pivot holds substantial implications for the oil and gas sector, influencing how energy firms communicate their climate strategies and risks to investors.
On May 4, the agency initiated the regulatory procedure by submitting a proposal to rescind its 2024 climate rule to the Office of Information and Regulatory Affairs. This action marks the formal beginning of a process to withdraw a regulation that never truly took root, having faced immediate legal challenges since its inception.
An SEC spokesperson confirmed that staff are actively preparing a recommendation for the Commission to withdraw the 2024 climate rules. This development underscores a notable change in leadership and regulatory philosophy under current SEC Chair Paul Atkins, reflecting a broader governmental effort to roll back climate-related regulations enacted during the previous administration.
Under Chairman Atkins’ direction, the Commission has re-focused its efforts on its foundational mission, emphasizing a materiality-driven approach to securities regulation, consistent with its established legal parameters. This perspective suggests that climate disclosures, in their initially proposed form, may have exceeded what the agency considers its core mandate.
A Federal Mandate That Never Saw the Light of Day
The controversial climate-risk disclosure rule was initially finalized in March 2024, passing with a 3-2 vote under former Chair Gary Gensler, despite opposition from Republican commissioners Mark Uyeda and Hester Peirce. While the final version represented a scaled-back iteration of the initial 2022 proposal—notably omitting the contentious Scope 3 emissions reporting requirement, which covers value-chain emissions—it still presented a substantial compliance burden.
Had it been implemented, the rule would have compelled certain public companies to report climate-related risks deemed material, or those reasonably likely to have a material financial impact on their operations. Energy sector participants, especially, would have faced scrutiny over their exposure to physical and transitional climate risks.
Furthermore, companies would have been required to detail their climate mitigation activities linked to their strategic outlook, business models, or future projections. Specifically, large accelerated filers and accelerated filers faced a phased implementation for disclosing Scope 1 emissions (direct emissions from owned or controlled sources) and Scope 2 emissions (indirect emissions from purchased energy). For investors, the rule aimed to standardize climate-risk data across markets, offering a clearer lens for evaluating the long-term viability of energy investments. For companies, it posed new questions regarding governance structures, internal controls, assurance processes, and potential legal exposure.
The rule’s finalization was met with immediate legal challenges from various industry groups and Republican-led states. In response, then-Chair Gensler promptly stayed the rule’s implementation, pending the resolution of litigation in the Eighth Circuit Court of Appeals.
The Question of Legal Authority: Central to the Rescission
The SEC’s current leadership has made the scope of its legal authority the cornerstone of its argument for withdrawing the rule. All three current commissioners—Chair Atkins, Commissioner Uyeda, and Commissioner Peirce—have consistently voiced skepticism regarding the SEC’s purview to regulate climate disclosures in such a prescriptive manner. This collective stance has driven the agency’s accelerated path toward rescission.
Following President Donald Trump’s return to office, Commissioner Uyeda, then acting SEC chair, requested the court to refrain from scheduling arguments. In March 2025, Chair Atkins directed SEC staff to formally retract the agency’s defense of the rule in court. A federal judge subsequently affirmed the agency’s prerogative, stating it was the SEC’s responsibility to decide whether its Final Rules would be rescinded, repealed, modified, or defended in litigation.
The SEC has since informed the Eighth Circuit that it intends to “reconsider the challenged Final Rules by notice-and-comment rulemaking” and has no intention of renewing its defense in court. According to court documents, staff recommendations have been prepared to address the current commissioners’ concerns, which fundamentally question whether the rules exceed the Commission’s statutory authority and if their costs outweigh their intended benefits for investors and the broader market.
Beyond Federal Oversight: Persistent Climate Reporting Demands for Energy Firms
While the anticipated rescission would undoubtedly alleviate federal disclosure obligations for U.S.-listed energy companies, it would not eradicate climate reporting from the corporate agenda. The landscape for sustainability reporting remains complex and multifaceted, particularly for multinational oil and gas enterprises.
California continues to uphold its ambitious climate disclosure laws, despite ongoing challenges related to implementation and legal validity. New York is also actively developing its own climate reporting proposals, further fragmenting the domestic regulatory environment. Internationally, numerous jurisdictions have already adopted stringent climate-risk disclosure frameworks or are progressively aligning with global sustainability reporting standards, such as those promulgated by the International Sustainability Standards Board (ISSB) or the European Union’s Corporate Sustainability Reporting Directive (CSRD).
This evolving patchwork means that a U.S. energy issuer, even if exempted from the SEC’s climate rule, could still face significant state-level obligations, intensified investor demands for transparent climate data, specific requirements from lenders, and a plethora of international disclosure mandates. For boards and executive leadership within the oil and gas sector, the immediate challenge is not whether climate data will disappear from capital markets, but rather discerning the sources of these demands, assessing their enforceability, and effectively managing inconsistent rules across multiple jurisdictions.
The SEC’s federal retreat undoubtedly reshapes U.S. policy, but the broader trajectory of corporate climate reporting remains dynamic and unsettled. Regulatory influence is increasingly diffusing, shifting power toward individual states, international markets, and, crucially, a growing cohort of institutional investors who continue to demand decision-useful risk data to inform their capital allocation strategies within the energy sector and beyond.
