The U.S. Securities and Exchange Commission has launched a formal review of climate disclosure rules, inviting public input on potential updates to Regulation S-K and S-X. This move signals a significant shift in how the SEC approaches material climate-related risks and sustainability reporting as investor demand for consistent, comparable ESG data continues to intensify.
For businesses navigating an already complex landscape of climate regulations, from California’s SB 253 to the Corporate Sustainability Reporting Directive (CSRD), this development raises critical questions about future compliance requirements.
What is the SEC climate disclosure law?
The SEC’s approach to climate disclosure stems from its 2010 interpretive guidance, which remains in effect and suggests that companies disclose the direct effect of environmental legislation and the impact of physical changes to our planet caused by climate change.
Current requirements under Regulation S-K and S-X:
- Disclose material climate-related risks in business descriptions, legal proceedings, risk factors, and management discussion
- Cover climate-related legislation, international agreements, shifts in consumer demand, and physical risks like severe weather events
- Based on materiality judgments made by individual companies
- Subject to reporting controls and governance through Disclosure Committees
What happened to the 2024 final rule?
- The SEC finalized its climate-related disclosure rule in March 2024
- Would have required public companies to report on material climate-related risks and greenhouse gas emissions if material
- The SEC issued a voluntary stay shortly after adoption as legal challenges mounted
- By March 2025, under the Trump administration, the SEC announced it would withdraw its defense of the climate-related disclosure rules
- The rules have never gone into effect
Today: Even in the absence of rules requiring disclosure of climate change-related risk on the federal level, some states have adopted regulations addressing disclosure of climate-based risks and greenhouse gas emissions.
What are the latest developments?
The SEC’s formal consultation marks a turning point. The Securities and Exchange Commission stated it is “asking the staff to evaluate our disclosure rules with an eye toward facilitating the disclosure of consistent, comparable, and reliable information on climate change.”
Why this review is happening:
- May 2020: Investor Advisory Committee recommended requiring disclosure of material ESG factors
- Late 2020: Asset Management Advisory Committee’s ESG Subcommittee urged standardized frameworks aligned with the Sustainability Accounting Standards Board (SASB)
- Current reality: Institutional investors continue to request and substantively deploy ESG information in their investment management practice
- Nearly all investors affirmed that for 2025 they continue to assess how companies manage financially material business risks and opportunities connected to sustainability
How to participate:
- The SEC established a webform and email channel for public feedback from investors, issuers, academics, and data providers
- The Commission encourages commenters to “submit empirical data and other information” for evidence-based policymaking
- Input will inform potential alignment with the International Sustainability Standards Board (ISSB) standards
Ongoing litigation and legal challenges:
- Legal challenges to the SEC’s climate-related disclosure rules were consolidated in the U.S. Court of Appeals for the Eighth Circuit
- September 2025: The Eighth Circuit held the litigation in abeyance, requiring the SEC to either reconsider the rules or renew its defense
- The Eighth Circuit emphasized that the SEC has the responsibility to determine whether its final rules will be rescinded, repealed, modified, or defended in litigation
- A coalition of 19 state attorneys general is defending the SEC rule in court, even as the agency withdrew its own defense
- The Eighth Circuit could still rule on the legal challenges, which may uphold the rules in whole or in part or remand them to the SEC for further consideration
What does this mean for businesses?
Companies are reviewing the stance of their sustainability disclosures across reporting platforms to ensure consistency around strategically important topics.
Prepare for enhanced disclosure requirements. Companies with fragmented ESG reporting may face pressure to adopt standardized approaches. Boards have a duty to monitor mission-critical issues while management needs systems in place to manage those issues.
Materiality and risk management remain critical. Companies are required to disclose their material climate-related risks and the measures they are taking to manage those risks. This includes physical risks, transition risks tied to business strategy, and emissions reductions targets.
Litigation and greenwashing risks. Companies are increasingly facing litigation around failures to oversee and monitor ESG issues, known as Caremark claims. The rules increase the risk of “greenwashing” claims if disclosures are inaccurate. Many companies are assessing whether existing claims of ‘green’ or ‘sustainability’ can be retained in the context of new reporting requirements.
Benefits for investors and capital markets. Investors can better identify material risks to a company’s financial health, facilitating more accurate valuation and capital allocation through enhanced financial reporting and emissions data.
What are the other major US climate laws?
While the federal mandate is in limbo, its significance persists through its influence on global standards. Companies are reporting on a broad range of sustainability-linked regulations, even in the absence of the SEC’s climate-related disclosure rule.
California SB 253 (Climate Corporate Data Accountability Act): California is requiring greenhouse gas reporting from companies doing business in the state, which may affect many SEC registrants. California’s SB 253 requires businesses with annual revenues of more than $1 billion that do business in California to disclose Scope 1 and Scope 2 GHG emissions, starting in 2026. The California Air Resources Board oversees implementation.
California SB 261: Requires companies meeting certain criteria to report on climate-related financial risks and adaptation measures in their business strategy.
New York CCDAA (Climate Change Disclosure Act): California is requiring GHG reporting from companies doing business in the state, affecting both public companies and private companies.
State-level momentum: Illinois and Colorado introduced their own legislation related to emissions disclosures in early 2025. Many states have ‘copycat bills’ based on California’s regulations at various stages in their legislative process. Some state regulations are intended to apply not only to certain companies that are incorporated in a state, but also extend to those meeting certain criteria that do business within the state.
Cross-jurisdiction compliance: Companies with global operations must navigate various cross-jurisdiction reporting requirements, including the EU CSRD and EU Taxonomy. Many jurisdictions are moving towards mandatory sustainability disclosures, building on existing voluntary practices. The International Sustainability Standards Board (ISSB) has published global sustainability disclosure standards that many jurisdictions are adopting, including requirements for supply chains and Scope 3 emissions.
ESG reporting platforms can help
Significant operational costs are incurred by companies for tracking and reporting emissions, along with third-party assurance to meet data standards across registration statements, SEC filings, and sustainability reports.
Sweep addresses these challenges. Upload once, use everywhere, from California’s SB 253 requirements to CSRD to frameworks from the Sustainability Accounting Standards Board and ISSB standards.
With Sweep, you can:
- Centralize emissions data across Scopes 1, 2, and 3 for compliance with state laws and other stakeholders
- Maintain audit trails that satisfy disclosure requirements and governance standards
- Ensure consistency across SEC filings, sustainability reporting, and qualitative information for investors
- Reduce compliance costs while managing sustainability risks and sustainability issues
- Future-proof reporting as US companies navigate evolving esg reporting requirements
All SEC disclosure requirements are subject to reporting controls and governance. As climate risks become increasingly material to business strategy and capital markets, having the right infrastructure isn’t optional—it’s essential.
Book a demo to see how Sweep can simplify your climate disclosure and sustainability reporting.
