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The SEC Is Rolling Back Disclosure. Here’s What Companies And Investors Need To Know

TOPSHOT - In this aerial view taken from a helicopter a blue van sits intact amid burned homes seen from above during the Palisades fire near the Pacific Palisades neighborhood of Los Angeles, California on January 9, 2025. Massive wildfires that engulfed whole neighborhoods and displaced thousands in Los Angeles remained totally uncontained January 9, 2025, authorities said, as US National Guard soldiers readied to hit the streets to help quell disorder. Swaths of the United States' second-largest city lay in ruins, with smoke blanketing the sky and an acrid smell pervading almost every building. (Photo by JOSH EDELSON / AFP via Getty Images)

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The need for clear climate-related financial information has never been more urgent.

From droughts to floods to wildfires, the U.S. is enduring an escalating number of deadlier and more damaging weather disasters, which have cost the country $1.5 trillion and killed thousands of Americans in just the past decade. These increasingly unpredictable weather patterns are reducing agricultural yields, disrupting global supply chains, and causing insurers to retreat from disaster-prone housing markets.

The market needs to know how investors and companies are preparing for these challenges, acting on them, and supporting the transition to a cleaner, more resilient energy economy to avoid worsening disasters.

It is one of the reasons why, in 2024, the U.S. Securities and Exchange Commission adopted the first-ever federal rule requiring public companies to report on the climate-related risks they face, including material greenhouse gas emissions and financial costs associated with extreme weather.

Investors and companies applauded the move, which they had long supported. An analysis conducted by Ceres found pension funds, asset managers, and individual investors alike were overwhelmingly in favor of a rule that would provide standardized, decision-useful data to help them price risk accurately and allocate capital wisely. Companies also supported the rule in part because, while many were already reporting on these risks, there were confusing and overlapping standards and guidelines within and outside of the U.S.

Now, at a moment when the financial and economic risks to the markets, from supply chain disruptions to lower crop yields to worker productivity, continue to grow, the SEC is rolling back the rule. This move doesn't make that demand for information and transparency go away. It just means investors and companies will be forced to rely on inconsistent, incomplete, or nonexistent disclosures.

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The Rest of the World Isn't Waiting

The good news is that the global market is moving forward. The International Sustainability Standards Board, a body established to develop a unified baseline of sustainability-related financial disclosures for capital markets, has issued global baseline standards for climate-related disclosure, and the European Union's Corporate Sustainability Reporting Directive is already reshaping how companies report. More than 41 countries have approved or proposed climate disclosure rules. Together, these countries account for about 60 percent of the world’s gross domestic product.

Insurers, too, are expanding climate-related financial disclosures as they grapple with mounting losses from extreme weather. A Ceres analysis found that U.S. insurers have widely adopted the Task Force on Climate-related Financial Disclosures framework, which is the global foundation for climate-related financial reporting. Some 83% of U.S. insurers now provide disclosures across risk management, strategy, governance, and setting and tracking metrics and targets.

What Investors and Companies Can Do

1. Companies can voluntarily disclose their climate risk information. Companies already do this because they know it is in their best interest, giving them and their investors the information they need to assess and manage the risks they are exposed to, and identify lucrative, growing opportunities in a cleaner, advanced energy economy. Just as critically, many of the largest U.S. companies operating abroad will face some disclosure requirements that, in some areas, exceed what the SEC was proposing.
2. Investors and companies can develop and publish climate transition plans. For companies, plans can include how they are going to meet specific, measurable, and time-bound goals. These are even more necessary now for increased transparency and accountability in the market, providing insight into businesses that reduce exposure and focus on long-term value creation and competitiveness. Investor climate action plans, or ICAPs, can share those same goal-oriented commitments across four interlocking areas: investment, corporate engagement, policy advocacy, and investor disclosure.
3. Shareholder engagement remains a powerful tool for managing portfolio risk. Investors would do well to continue filing and supporting shareholder resolutions that call for greater transparency on climate-related financial risks — a strategy that has proven effective in ensuring shareholder value and reducing litigation and other costs for companies.
4. Monitor and engage with state-level disclosure frameworks already taking shape in California and New York. As these states move to fill potential gaps in federal standards, investors and companies operating across jurisdictions have an opportunity to help shape requirements that align with international frameworks — such as the International Sustainability Standards Board and TCFD — many are, or will soon be, required to follow.

The SEC was established to restore public confidence in financial markets by ensuring investors have the information they need to make sound decisions. Abandoning the climate disclosure rule doesn't make the risk disappear. Rescinding this rule is a step backward for markets, for companies, and for the millions of Americans whose financial future depends on their investments.