SEC Climate Disclosure Rule: What the Abeyance Actually Means for Public Companies

The SEC's landmark climate disclosure rule has been stayed since April 2024, abandoned by the agency that wrote it, and left in a legal holding pattern by a federal appeals court that refuses to decide the case. None of that means companies can ignore it.

Understanding the current position requires separating three distinct questions: what the rule actually requires, what the litigation has done to its enforceability, and what parallel obligations - federal and state - remain live regardless of the Eighth Circuit's next move.

What the Rule Requires

The SEC adopted the Enhancement and Standardization of Climate-Related Disclosures for Investors on March 6, 2024. The rule, spanning ^[1], imposes a layered disclosure regime on all domestic and foreign registrants filing annual reports on Form 10-K or Form 20-F, as well as most registration statements.

The core obligations fall into three categories:

Governance and risk management. All registrants must describe how their board and senior management oversee climate-related risks, how those risks are integrated into business strategy, and what processes exist to identify and manage them. ^[2]

Financial statement disclosures. Registrants must quantify, in footnotes to their audited financial statements, the costs and losses attributable to severe weather events and other natural conditions, as well as expenditures on climate-related risk mitigation. ^[3]

GHG emissions. This is the most operationally demanding element - and the most contested. Scope 1 and Scope 2 GHG emissions disclosures are required only for large accelerated filers (LAFs) and accelerated filers (AFs), and only when those emissions are material. ^[1] Smaller reporting companies, emerging growth companies, and non-accelerated filers are exempt from GHG reporting entirely. ^[4]

Scope 3 emissions - the upstream and downstream value chain - were dropped from the final rule. The SEC removed Scope 3 requirements citing the volume of comments on compliance costs and concerns about the consistency and reliability of Scope 3 data. ^[5] However, registrants must still disclose material supply chain climate risks if they have a significant impact on financial performance - a standard the SEC has not defined with precision. ^[6]

The phased implementation timeline gave LAFs nearly two years to provide most disclosures, three years for GHG emissions data, and six years to obtain limited assurance over those emissions. ^[4] Under the original schedule, the first compliance deadline for large accelerated filers was set for fiscal year 2025 annual reports filed in 2026. ^[7]

The Litigation: A Chronology

The rule never took effect. Within days of adoption, it was challenged by a coalition of states, industry groups, and NGOs - some arguing it exceeded the SEC's statutory authority, others that it did not go far enough. ^[8]

On March 15, 2024, the Fifth Circuit granted an administrative stay of the rule at the request of industry groups. ^[9] The Judicial Panel on Multidistrict Litigation then consolidated nine circuit court challenges and randomly selected the Eighth Circuit as the venue. ^[8] In April 2024, the SEC under the Biden administration voluntarily stayed implementation of the rule pending judicial review. ^[10]

The change of administration transformed the posture entirely. On March 27, 2025, the SEC voted to end its defense of the climate disclosure rules and notified the Eighth Circuit that agency counsel was no longer authorized to advance the arguments in the brief the SEC had previously filed. ^[11] Acting Chair Mark Uyeda described the rules as "costly and unnecessarily intrusive." ^[11]

Eighteen states and the District of Columbia, which had intervened to defend the rules, then moved to hold the case in abeyance. The Eighth Circuit granted that motion on April 24, 2025, and directed the SEC to file a status report within 90 days addressing whether it intended to review or reconsider the rules. ^[12]

The SEC's July 23, 2025 status report produced an unusual result. Rather than announcing a formal rollback, the Commission stated it did not intend to review or reconsider the rules "at this time" - and then asked the court to terminate the abeyance and decide the case on the merits. ^[13] The SEC's apparent logic: a court ruling against the rules would constrain future administrations more cleanly than a notice-and-comment rescission. Commissioner Caroline Crenshaw dissented sharply, characterising the status report as "wholly unresponsive" to the court's directive. ^[14]

The Eighth Circuit declined to cooperate. On September 12, 2025, the court ordered the litigation held in abeyance until the SEC either reconsiders the rules through notice-and-comment rulemaking or renews its defense of the Final Rules. ^[15] The court's message was direct: "It is the agency's responsibility to determine whether its Final Rules will be rescinded, repealed, modified, or defended in litigation." ^[16]

The Broader Federal Retreat

The SEC's posture sits within a wider federal withdrawal from climate-related financial oversight. The Federal Reserve disbanded its Supervision Climate Committee and Financial Stability Climate Committee in 2025. ^[17] The Financial Stability Oversight Council similarly rescinded the charters of two climate advisory committees formed during the Biden administration. ^[17]

At the EPA, on September 16, 2025, the agency proposed a rule to effectively end the Greenhouse Gas Reporting Program, which would terminate reporting requirements for most source categories. ^[17] If finalised, 2024 would be the last reporting year under that programme. The EPA has also announced it will pursue rescinding the 2009 endangerment finding for greenhouse gases, which underpins a range of Clean Air Act obligations. ^[17]

California Fills the Gap - and Then Some

For companies doing business in California, the federal retreat is largely irrelevant. California's two climate disclosure statutes impose obligations that are, in several respects, more demanding than the SEC rule ever was.

SB 253 (Climate Corporate Data Accountability Act) applies to US-organised entities with total annual revenues exceeding $1 billion that do business in California. SB 253 requires annual disclosure of Scope 1, Scope 2, and Scope 3 GHG emissions in conformance with the GHG Protocol, with an initial Scope 1 and 2 reporting deadline of August 10, 2026. ^[18] Scope 3 reporting follows in 2027. Unlike the SEC rule, SB 253 covers both public and private companies. ^[19] Penalties for non-compliance can reach $500,000 per entity per year. ^[20]

SB 261 (Climate-Related Financial Risk Act) applies to US-organised entities with revenues exceeding $500 million doing business in California, requiring biennial disclosure of climate-related financial risks aligned with TCFD or equivalent frameworks. ^[21] SB 261 is currently subject to a Ninth Circuit injunction following a constitutional challenge by the US Chamber of Commerce. The Ninth Circuit granted an injunction against SB 261 enforcement on November 18, 2025; SB 253 is unaffected and remains fully in effect. ^[22]

The California Air Resources Board (CARB) approved implementing regulations for both laws on February 26, 2026. ^[18] CARB has signalled that good-faith first-year compliance efforts will be sufficient and that penalties will not be imposed on companies acting in good faith during the initial reporting cycle. ^[21]

What Compliance Teams Must Do Now

The abeyance is not a compliance holiday. Three distinct risk vectors remain live.

1. Materiality obligations under existing securities law. The SEC's climate disclosure rules may be stayed, but the underlying obligation to disclose material information in public filings is not. Climate-related matters may constitute information that is "material" to shareholders and should be evaluated on a case-by-case basis for inclusion in public company filings regardless of the rule's status. ^[12] A company that omits a material climate risk from its 10-K faces civil liability under existing securities laws even without the new rule.

2. California deadlines are real and imminent. Companies with over $1 billion in revenue doing business in California face an August 10, 2026 deadline for Scope 1 and 2 GHG disclosures under SB 253. ^[18] Companies with over $500 million in revenue should prepare SB 261 reports and be ready to publish promptly if the Ninth Circuit lifts the injunction. ^[18]

3. The SEC rule could be revived. The rules have not been rescinded. A formal rollback requires notice-and-comment rulemaking under the Administrative Procedure Act. ^[23] A future administration could reinstate or strengthen them without new legislation. Companies that have maintained data collection infrastructure will be significantly better positioned than those that have not.

The Underlying Tension

The SEC's current position is legally awkward. A majority of commissioners have stated publicly that they believe the agency lacked statutory authority to adopt the rules. ^[13] Yet the Commission has not initiated a formal rescission, apparently preferring a court ruling that would constrain future administrations more durably than an APA rollback. The Eighth Circuit has refused to play that role, insisting the agency must make its own decision.

The result is a rule that is technically law, practically unenforced, and politically contested - a combination that creates genuine planning uncertainty for any company with a multi-year compliance horizon.

The practical answer is to treat the SEC rule as dormant rather than dead, maintain the data infrastructure needed to comply if it revives, and focus near-term compliance resources on the California obligations that are live and enforceable now.