The Commission’s May 2026 proposal to withdraw its landmark climate disclosure regime marks a decisive shift in federal ESG rulemaking—with significant strategic implications for public companies, investors, and legal counsel navigating a fragmented disclosure landscape.
The Securities and Exchange Commission on May 29, 2026 issued a proposed rulemaking to rescind, in their entirety, the climate-related disclosure rules it adopted in March 2024. The proposed rules represent the culmination of more than two years of legal uncertainty surrounding the rules, which were stayed shortly after adoption, challenged in consolidated litigation before the U.S. Court of Appeals for the Eighth Circuit, and ultimately abandoned by the Commission when it voted to withdraw its defense in March 2025. The proposal is now open for a 60-day public comment period.
For energy, clean technology, and broader capital markets participants, this proposed rescission is far more than a procedural housekeeping exercise. It signals a fundamental recalibration of the SEC’s approach to ESG-related disclosure and raises critical questions about the patchwork of state, federal, and international climate reporting obligations that remain in force.
Background: The Rise and Fall of the Final Rules
The Commission originally proposed the climate disclosure rules in March 2022 and adopted them by a 3-2 vote on March 6, 2024. The Final Rules created a sweeping new disclosure regime, including new Subpart 1500 of Regulation S-K and a new Article 14 of Regulation S-X, requiring registrants to disclose detailed information about greenhouse gas emissions, climate-related risk management, scenario analysis, internal carbon pricing, transition plans, and climate-related financial statement effects. Large accelerated filers and accelerated filers were required to disclose material Scope 1 and Scope 2 emissions and obtain third-party attestation on a phased-in basis. Nearly every registrant would have been required to begin compliance by the fiscal year beginning in 2027.
The rules never took effect. On April 4, 2024, the Commission stayed the Final Rules pending consolidated judicial review in the Eighth Circuit. On March 27, 2025, the Commission voted to end its defense of the rules, and in September 2025 the Eighth Circuit held the petitions in abeyance, placing the burden on the Commission to determine the rules’ fate through notice-and-comment rulemaking.
Key Takeaways for Reporting Companies and Counsel
- Existing disclosure obligations remain in full force. Even without the Final Rules, public companies must continue to disclose material climate-related matters under existing Regulation S-K and Regulation S-X provisions, as reinforced by the 2010 Guidance and the anti-fraud provisions of the federal securities laws. Companies in carbon-intensive industries (including energy, mining, utilities, and transportation) should continue to evaluate whether climate risks are material to their business, results of operations, or financial condition.
- Voluntary disclosure practices are widespread and likely to continue. Approximately 47% of all annual filings submitted in 2024 and 2025 already contained climate-related keywords, with rates exceeding 90% in industries such as mining and construction. Among large accelerated filers, 55% disclosed Scope 1 or Scope 2 emissions in fiscal year 2023, and 87% of S&P 500 companies had set climate-related targets by 2024. Market forces, investor expectations, and third-party frameworks will continue to drive disclosure. Companies should evaluate their current voluntary climate disclosures against existing SEC requirements, state-level mandates (particularly California’s SB 253), and the expectations of their investor base. Underwriters and capital markets counsel should likewise consider how the absence of standardized climate disclosures may affect due diligence processes and offering document risk factor analysis.
- A fragmented regulatory landscape persists. California’s SB 253 still requires covered companies to report Scope 1 and Scope 2 emissions beginning in 2026 and Scope 3 emissions beginning in 2027, although enforcement of SB 261 (climate-related financial risk reporting) has been enjoined by the Ninth Circuit. At the international level, the ISSB recently amended IFRS S2 to reduce complexity in GHG emissions disclosure requirements, and the EU adopted legislation in February 2026 to narrow the scope of the CSRD and postpone implementation timelines. Companies with international operations or listings must continue to monitor these evolving regimes.
- The EPA’s greenhouse gas reporting program is also in flux. The EPA proposed amendments in September 2025 to largely end its Greenhouse Gas Reporting Program, which would eliminate reporting obligations for most source categories and delay requirements for remaining categories until 2034.
Implications for Investors
The proposed rescission does not eliminate the demand for climate-related information in the capital markets—it shifts the burden of obtaining that information back to market-driven mechanisms. For institutional investors who have built ESG-related investment strategies, the loss of a standardized, centralized federal disclosure framework may increase information asymmetries and the cost of compiling comparable data across registrants. Conversely, the elimination of mandatory disclosure requirements will reduce litigation exposure for registrants, as the Final Rules would have subjected climate-related disclosures to Securities Act and Exchange Act liability.
Looking Ahead
The comment period on the proposed rescission is open and runs for 60 days following Federal Register publication. While the political and judicial trajectory suggests the rescission is likely to be finalized, the comment process may surface significant opposition from institutional investors and ESG-focused advocacy groups. Regardless of outcome, the broader trend is unmistakable: the United States, like the European Union and ISSB, is moving away from highly prescriptive, top-down climate disclosure mandates and toward a more flexible, materiality-based approach.
Market participants would be well served to use this transition period to audit their current disclosure practices, align their reporting with existing legal requirements and credible voluntary frameworks, and prepare for the possibility that state-level and international mandates may ultimately define the floor for climate-related transparency. The regulatory landscape is shifting, but the market’s appetite for climate-related information is not going away.
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