Public pension managers and institutional investors, including the California Public Employees' Retirement System (CalPERS) and the New York City Comptroller's Office, are actively urging the Securities and Exchange Commission (SEC) not to scrap a Biden-era rule that mandates publicly traded companies to disclose climate-related emissions and risks. These investors, representing trillions of dollars in assets, contend that this information is crucial for making informed investment decisions, allocating capital, and casting proxy votes, arguing that the current landscape of climate-risk disclosures is "deficient." They emphasize that the information, while not mandatory for all investors to use, is essential for those who need it to manage climate risks within their portfolios. This stance is supported by a coalition of Democrat-led states, cities, and environmental nonprofits.
Conversely, a variety of influential business trade associations, including the Business Roundtable, the National Association of Wholesaler-Distributors, and the American Chemistry Council, are opposing the SEC's climate-risk disclosure rule. Their arguments center on claims that the rule exceeds the SEC's statutory authority, is arbitrary and capricious, and that its costs outweigh its benefits. For instance, the Business Roundtable, representing over 200 CEOs, views the rule as an "unwarranted overreach," despite its members' commitment to voluntary climate disclosures. The National Association of Wholesaler-Distributors, representing over 250,000 U.S. wholesale distribution companies, warns that the regulation's costs will cascade down to significantly burden small and medium-sized businesses throughout the supply chain. The American Chemistry Council argues the rule could disincentivize companies from setting climate-related targets or force them to create multiple, potentially conflicting, disclosures for different jurisdictions.
The SEC initially finalized the climate-risk disclosure rule in March 2024 under Chair Gary Gensler, but it immediately faced legal challenges. Following a change in administration, the SEC has begun the process of rescinding the rule, sending a proposal to the Office of Information and Regulatory Affairs in May 2026. The agency informed the Eighth Circuit Court of Appeals of its intent to reconsider the challenged rules, citing concerns that they exceed statutory authority and that costs outweigh benefits. This move reflects a shift in the SEC's stance, as it no longer intends to defend the rules in court and is instead preparing a recommendation for formal rescission. Despite this potential federal rollback, companies will still face a complex climate risk disclosure landscape due to existing and developing regulations in states like California and New York, as well as a growing number of international jurisdictions.
As of August 20, court documents showed a significant division: 13 briefs were submitted by 48 groups opposing the rule, while 11 briefs were filed by 17 amici and 18 states in support. This broad disagreement highlights the contentious nature of the SEC's climate disclosure rule and its implications for both investors and businesses. Pension giants specifically warned that rescinding the SEC climate rule would impose significant costs on investors, underscoring the perceived utility of these disclosures for long-term financial stability and risk management. The ongoing debate underscores the fundamental tension between calls for greater transparency on climate risks and concerns over regulatory burden and scope.
