The U.S. Securities and Exchange Commission (SEC), which has previously backed away from more stringent climate-related disclosure requirements, is now proposing to completely drop its new rules in that area.
In 2024, under the previous U.S. administration, the SEC proposed to expand the climate disclosure requirements for public companies — an initiative that was stayed in the face of legal challenges until last year, when the regulator declared that it would drop its defence of those proposals.
Now, the SEC is proposing to completely rescind its climate disclosure rules on the basis that — it now says — these rules exceed its authority.
“The final rules were a dramatic overreach of the commission’s statutory authority and, independently, unsound as a matter of policy,” the SEC said in the proposal published on Friday.
Additionally, the regulator said that the cost of complying with these kinds of requirements — including specific emissions disclosures — exceeds the benefits, and run contrary to its goal of facilitating capital formation and encouraging companies to go public.
“Based on an incorrect view of the scope of its authority, the commission determined that it was appropriate to prescribe dozens of pages of highly specific disclosure rules solely about climate-related matters and apply the bulk of those rules to virtually all public companies, regardless of size, industry, or specific circumstances,” the regulator said in its filing.
“We must re-examine the costs, burdens, and benefits of disclosure mandates to make becoming and remaining a public company more attractive again. SEC disclosure obligations should comply with the commission’s statutory authority, be guided by materiality as the North Star, avoid the practical effect of dictating corporate behaviour, and be imposed only when the expected benefits justify the likely costs and burdens,” said Paul Atkins, chair of the SEC, in a statement.
The proposed recession is now out for a 60-day comment period.
After the SEC backed away from mandatory climate disclosure last year, the Canadian Securities Administrators (CSA) also decided to pause its work in the area, citing growing “competitiveness concerns for Canadian issuers.”