In the midst of rising environmental concerns, climate-related financial disclosures have become a paramount focus within corporate governance as stakeholders and investors of public companies are calling on corporate leadership to integrate transparent business strategies that assess material climate-related risks, which pose legitimate impacts on corporate strategy and capital allocation.[1] In response to calls for transparent environmental-risk reporting, the Securities and Exchange Commission (the “SEC” or “Commission”) announced its finalized Climate-Related Risk Disclosure Rule (the “Rule”) in March of 2024.[2]
At a high-level, the Rule was set to require public companies to report on material climate-related risks that affect business strategies and operations, as well as mandated that some large companies disclose their material greenhouse gas emissions, if material.[3] The Rule’s announcement sparked controversy, and Republican state attorneys general, private companies, and environmental groups filed lawsuits challenging it.[4] Earlier this year, the SEC abandoned the Rule entirely, leaving corporate America with unanswered concerns about the future of climate-related financial regulation as well as the SEC’s regulatory authority.[5]
The Rule’s Requirements
The final version of the Rule, announced by the SEC on March 6, 2024, outlined a series of requirements for public companies regarding reporting on material climate-related risks.[6] Under the terms of the Rule, information is material if it is “reasonably likely to have a material impact on the registrant’s business strategy, results of operations, or financial condition.”[7] The Rule mandated that companies report:
on the impacts of climate-related risks on the company’s strategy, business model, and outlook, and steps the company had taken to mitigate or adapt, if material. Additionally, companies would report on their governance regarding climate-related risks, risk management, and climate targets and goals. Companies would report financial information about climate-related risks the company faced, including their costs, expenditures, and losses related to severe weather events. A subset of large companies would also disclose their scope 1 and 2 greenhouse gas emissions, if material.[8]
This Rule marked a step toward more transparent corporate governance, where investors would receive clear insights into potential risks posed by climate change, which could thus enable them to make more informed investment decisions.[9] Overall, this Rule was aimed at fostering greater transparency and accountability in the financial markets.[10]
The SEC’s Pullback of the Rule
Immediately after the SEC released the final Rule, lawsuits came filing in from those who opposed the initiative, including groups of politicians, private companies, and various environmental organizations.[11] Challengers had two primary arguments against the Rule’s enforcement: (1) that the Rule was an example of regulatory overreach, and (2) that it would create burdensome and time-consuming procedures for businesses.[12] Under the first argument, challengers focused their claims against the SEC and argued it lacked statutory authority to promulgate the Rule without an explicit Congressional mandate and that the Rule violated the Administrative Procedure Act (APA) for being arbitrary and capricious.[13] Under the second argument, challengers maintained that the Rule’s requirements would be burdensome to smaller public companies, and asked businesses to take resources away from core business operations.[14]
These sentiments culminated in Iowa v. U.S. Securities and Exchange Commission; a consolidated litigation filed in March 2024 in the U.S. Court of Appeals for the Eight Circuit.[15] The case included more than a dozen states that opposed the Rule.[16] One month later in April 2024, the SEC voluntarily stayed implementation of the Rule in response to this onslaught of litigation and the procedural complexities that this debate posed. [17]
In midst of the ongoing litigation, earlier this year on March 27, 2025, the SEC notified the Eight Circuit that it would withdraw its defense of the Rule.[18] To many, this decision came as no surprise.[19] The final Rule, announced during the Biden Administration, faced massive criticism from conservatives fearful of the Rule’s harm it could have on businesses and investing habits.[20] The re-election of President Trump and nomination of Republican Party member Paul Atkins as Chairman of the SEC signaled that the new administration would implement initiatives – such as withdrawing this Rule – aimed at rolling back regulatory and enforcement efforts promulgated during the Biden Administration.[21]
In response to the SEC’s decision to withdraw its defense, a group of intervening states filed a motion requesting the Eight Circuit to hold the case in abeyance.[22] This motion was granted on April 24, 2025, and the SEC was directed to file a status report within 90 days advising whether it intended to review or reconsider the Rule.[23] Subsequently, on July 23, 2025, the SEC filed a status report asking the Court to terminate the abeyance, continue considering the parties’ arguments, and exercise its jurisdiction to decide the case.[24]
The SEC’s status report sparked backlash, and those in support of the Rule argued that the Commission’s response was an attempt to circumvent legal obligations under the APA’s rulemaking procedures.[25] Rather than rescinding, repealing, or modifying the Rule and going through the notice-and-comment process, the SEC’s report avoided this effort under the guise that it was conserving the Commission’s time and resources by terminating the abeyance and requesting that the Court issue a decision on the merits.[26] To many, this was viewed as a clouded, yet resounding, “No” in response to the question of whether the SEC intended to revisit the Rule.[27] Ultimately, without clear direction from the SEC around how it plans to proceed with the Rule, litigation is effectively paused on this case.[28] Current circumstances suggest an uncertain future for corporations as they attempt to navigate balancing climate concerns and calls from investors to improve corporate governance procedures.[29]
The Expected Impacts of the SEC’s Anticipated Abandonment of the Rule
The withdrawal of the SEC’s defense of the Rule does not necessarily mean the end of the Rule and its potential implementation.[30] However, amidst the uncertainties around climate change and its impact on corporate governance, many businesses are making individual strides to prepare for unpredictable times ahead.[31] Consulting organizations are recommending that companies use this period of uncertainty to embrace the Rule as if it were in effect to mitigate risks and demonstrate the commitment to transparency and sustainability that investors are seeking from corporations.[32] Not only does this show a responsiveness to environmental and shareholder concerns, but it positions businesses to become leaders in ESG reporting which can help with gaining a competitive edge in the marketplace.[33]
Regardless of whether a business is interested in disclosing climate-related risks, Iowa v. U.S. Securities and Exchange Commission serves as a case study for a growing interest across the globe for greater transparency within corporate governance and businesses’ climate-risk mitigation efforts.[34] Domestically and internationally, there is a rising number of disclosure-related lawsuits being brought by governmental authorities, investors, consumers, and non-governmental organizations.[35] In response to this trend, companies should plan to incorporate some level of transparent climate-disclosure initiatives into their business strategies.[36]
Conclusion
The SEC’s decision to withdraw its defense of the Rule represents a wider effort under the Trump administration to rollback climate-related risk disclosure requirements for corporations. While this may seem like a setback toward achieving a more transparent and accountable corporate governance structure, the reality is that the world is currently facing grave climate concerns that are going to impact corporations regardless of whether the Rule is implemented. With an unpredictable future ahead, corporations are being advised to prepare by embracing disclosure policies to set themselves up for success against an ongoing battle for greater corporate transparency and accountability among business leaders.
[1] Lorenzo Fantini et al., What You Need to Know About the SEC’s Proposed Climate Rule, BCG (Sept. 30, 2024), https://www.bcg.com/publications/2024/what-to-know-sec-climate-regulation.
[2] Sara Dewey & Sarah Hart-Curran, Eight Circuit Says SEC Must Defend or Revive Climate Risk Disclosure Rule, Harvard Law School: Environmental & Energy Law Program (Oct. 8, 2025), https://eelp.law.harvard.edu/sec-declines-to-defend-or-rescind-climate-risk-disclosure-rule/.
[3] See id.
[4] Id.
[5] See id.
[6] See Fantini et al., supra note 1.
[7] Id.
[8] Dewey & Hart-Curran, supra note 2.
[9] KPMG, The SEC’s climate rule pause: What happens next?, https://kpmg.com/us/en/articles/2024/sec-climate-rule-pause.html (last visited Oct. 10, 2025).
[10] Id.
[11] See Dewey & Hart-Curran, supra note 2.
[12] See Sara Dewey, The Securities and Exchange Commission Finalizes a Narrower Climate-Related Risk Disclosure Rule, Harvard Law School: Environmental & Energy Law Program (Mar. 21, 2024), https://eelp.law.harvard.edu/wp-content/uploads/2024/09/SEC-Climate-Related-Risk-Rule-Summary-and-8th-cir.pdf; Stuart Kaplow, Court Indefinitely Pauses SEC Climate Rule Litigation, Green Building Law Update (May 18, 2025), https://www.greenbuildinglawupdate.com/2025/05/articles/climate-change/court-indefinitely-pauses-sec-climate-rule-litigation/.
[13] See Dewey, supra note 12.
[14] Kaplow, supra note 12; Bill Ainsworth, The SEC eliminated climate rules. Other governments are doing the opposite., Harvard Business School (July 1, 2025), https://www.hbs.edu/bigs/federal-climate-rules.
[15] Sidley Austin, SEC Ends Defense of Climate-Related Disclosure Rules, (Apr. 1, 2025), https://www.sidley.com/en/insights/newsupdates/2025/04/sec-ends-defense-of-climate-related-disclosure-rules.
[16] Kaplow, supra note 12.
[17] Dewey & Hart-Curran, supra note 2.
[18] Id.
[19] See Jones Day, SEC Signals It Will Abandon Defense of Climate Disclosure Rule (Feb. 2025), https://www.jonesday.com/en/insights/2025/02/sec-signals-it-will-abandon-defense-of-climate-disclosure-rule.
[20] See Dewey & Hart-Curran, supra note 2.
[21] See SEC Signals It Will Abandon Defense of Climate Disclosure Rule, supra note 19.
[22] Kaplow, supra note 12.
[23] Id.
[24] Dewey & Hart-Curran, supra note 2.
[25] See Commissioner Caroline A. Crenshaw, Statement on the Commission’s Status Report in the Climate-Related Disclosure Rules Litigation (July 23, 2025), https://www.sec.gov/newsroom/speeches-statements/crenshaw-statement-climate-related-disclosure-rules-litigation-072325.
[26] See id.; See Dewey & Hart-Curran, supra note 2.
[27] See Crenshaw, supra note 25.
[28] See Dewey & Hart-Curran, supra note 2.
[29] See KPMG, supra note 9.
[30] SEC Sidley Austin, supra note 15.
[31] See Dewey, supra note 12.
[32] See KPMG, supra note 9.
[33] Id.
[34] See id.
[35] See Sidley Austin, supra note 15.
[36] Id.
