SEC Uncertain On Enforcing Climate Disclosure Rule

In a recent report to the Eighth Circuit Court of Appeals, the U.S. Securities and Exchange Commission (SEC) stated that it does not currently plan to revisit or change its climate disclosure rule. However, the agency also did not confirm whether it would enforce the rule if the ongoing legal challenges are unsuccessful. This uncertainty has raised worries about the future of corporate climate reporting in the United States and has attracted severe criticism from within the Commission itself.

The climate disclosure rule, finalized by the SEC in March 2024, requires public companies to disclose their climate-related financial risks, greenhouse gas emissions, and strategies to reduce potential environmental impacts. Advocates celebrated it as a key move toward improving corporate transparency on climate issues. However, it faced immediate and substantial opposition, including lawsuits from 25 Republican-led states, the U.S. Chamber of Commerce, and several industry groups. These legal challenges have been consolidated and are now under review in the Eighth Circuit.

In response to a court order seeking clarification on the agency’s enforcement plans if the rule is upheld, the SEC’s filing on July 23 stated that the Commission does not plan to revisit the rule "at this time." However, it noted that whether it would follow the rule if legal petitions are denied remains "subject to Commission deliberation." This unclear position has led to accusations that the SEC is trying to avoid its regulatory responsibilities, especially from its own leadership.

Commissioner Caroline Crenshaw is currently the only SEC commissioner who supported the climate disclosure rule. She sharply criticized the Commission’s silence. “The Commission simply does not want to say what we all know to be true by now—it has no intention of allowing the Climate-Related Disclosure Rules to go into effect,” Crenshaw said. She argued that the SEC’s lack of a clear answer weakens both the judicial process and public trust in the agency’s governance.

Crenshaw’s comments highlight a growing internal rift at the SEC, with three of the four current commissioners publicly opposing the climate rule. She accused the Commission of trying to invalidate the rule through inaction instead of following the formal process of rescission laid out in the Administrative Procedure Act. “The Court asked us very clearly ‘will [the Commission] follow the [R]ules if the petitions for review are denied?’ We didn’t—but should have—answered that question,” she added. “This is not good governance. The Court should not have to engage in these games.”

Legal experts and environmental advocates share these concerns. By not committing to enforce a rule that has already gone through the official rulemaking process and public comment period, critics argue, the SEC sets a risky precedent for regulatory enforcement. They say this move indicates that political pressure and internal disagreement may take precedence over the agency’s legal responsibilities and public promises.

The SEC’s uncertain position also raises larger issues about the enforceability of climate regulations in a divided political environment. Since its adoption, the climate rule has been seen as a significant step in aligning U.S. financial regulation with global climate risk disclosure frameworks. However, the resistance it has faced shows the contentious nature of climate policy in corporate America and the hurdles federal regulators encounter when enforcing environmental standards amid political challenges.

While the SEC insists that litigation should continue and has not formally withdrawn the rule, its lack of commitment to enforcement leaves companies, investors, and environmental groups uncertain. For now, the fate of the climate disclosure rule rests with the Eighth Circuit. Yet even if the court rules in favor of the regulation, the SEC’s indecision suggests that the fight over climate transparency is far from finished.

As Commissioner Crenshaw’s strong comments indicate, the Commission’s credibility and its role in environmental governance may depend not only on the legal outcome but also on whether it chooses to uphold its own rules despite political and legal pressures.