SEC Climate Disclosure Rule: Where It Stands in 2026
The SEC climate disclosure rule was adopted on March 6, 2024, stayed just weeks later pending litigation, and has never taken effect. As of mid-2026, the SEC has formally proposed to rescind the rule in its entirety, a public comment period closed on August 3, 2026, and a final rescission vote is expected in late 2026 or early 2027. Companies still need to pay attention, however, because state-level mandates and the EU’s Corporate Sustainability Reporting Directive (CSRD) are moving forward on their own timelines.
What the SEC Climate Disclosure Rule Actually Required
The original rule, adopted under then-Chair Gary Gensler and codified as amendments to Regulation S-K and Regulation S-X, would have required SEC registrants to include detailed climate-related information in their registration statements and annual reports. Key requirements included:
- Climate-related risk disclosures. Companies would have had to describe material climate-related risks and how those risks affect strategy, business model, and outlook over the short, medium, and long term.
- Governance disclosures. Boards and management teams would have needed to explain how they oversee and manage climate-related risks.
- Greenhouse gas (GHG) emissions metrics. Larger accelerated filers and accelerated filers would have had to disclose Scope 1 (direct) and Scope 2 (purchased energy) GHG emissions. Scope 3 emissions from the value chain were included in the original proposal but dropped from the final rule.
- Financial statement footnotes. Companies with material climate-related impacts on their financial estimates and assumptions would have had to provide quantitative disclosures in the audited financial statements.
- Attestation requirements. Scope 1 and 2 disclosures were ultimately subject to third-party attestation on a phased schedule, starting with limited assurance and moving toward reasonable assurance.
The rule would have applied on a tiered schedule based on filer category, with large accelerated filers facing the earliest compliance dates beginning with fiscal year 2025 reporting.
A Timeline of the SEC Climate Rule’s Short Life
Understanding where things stand today requires walking through a compressed two-year sequence of events.
March 2024: Rule Adopted
The SEC voted 3-2 along party lines to adopt the final rule, which was significantly narrower than the 2022 proposed rule. The Scope 3 reporting requirement was dropped, and smaller reporting companies were exempted from the emissions metrics entirely.
April 2024: Voluntary Stay Issued
Within weeks of adoption, multiple petitions for judicial review were filed in federal courts across the country. The SEC voluntarily stayed the rule on April 4, 2024, to allow consolidated litigation to proceed in the U.S. Court of Appeals for the Eighth Circuit. The rule has never been enforced.
March 2025: Commission Ends Its Defense
The newly constituted Commission, under Chair Paul Atkins, voted to stop defending the rule in litigation. The SEC’s position shifted: the agency argued the rule exceeded its statutory authority and imposed substantial costs on registrants and investors without commensurate benefit.
September 2025: Eighth Circuit Holds Case in Abeyance
On September 12, 2025, the Eighth Circuit issued an order placing the consolidated petitions in abeyance, directing the Commission to either reconsider the rules through formal notice-and-comment rulemaking or renew its defense. With the Commission unwilling to defend the rule, the only path forward was a formal rescission proceeding.
May-June 2026: Formal Rescission Proposed
On May 29, 2026, the SEC proposed to rescind the climate-related disclosure rules in their entirety. The proposal was published in the Federal Register on June 3, 2026. The Commission’s stated grounds were that the rules exceed the scope of the agency’s statutory authority under the Securities Act of 1933 and the Securities Exchange Act of 1934, and that a materiality-based, registrant-specific approach to disclosure better serves investors. The public comment period closed August 3, 2026.
Late 2026 or Early 2027: Final Vote Expected
After reviewing public comments, the Commission will need to vote on a final rescission rule. A final rule is not expected before late 2026 at the earliest, and procedural timelines could push it into 2027.
What the Rescission Means for Public Companies
For most SEC registrants, the practical answer is straightforward: the federal climate disclosure mandate is effectively dead. Companies that began building GHG measurement infrastructure specifically to comply with the SEC rule should reassess whether those investments are still justified on the federal compliance track alone.
That said, there are several reasons finance teams should not disengage from this topic entirely.
The materiality principle still applies. Even without the specific rule, publicly traded companies have long-standing obligations to disclose material risks in their SEC filings. If climate-related risks are material to a company’s operations, strategy, or financial condition, existing Item 303 (Management’s Discussion and Analysis) and Item 503 (Risk Factors) disclosure obligations apply. The rescission eliminates the prescriptive reporting format; it does not eliminate disclosure obligations where climate risks are genuinely material.
Investor demand has not evaporated. Institutional investors and lenders, particularly those with European counterparts or ESG mandates, continue to request climate-related data through questionnaires, CDP submissions, and proxy-related engagement. Companies that built data collection processes may find ongoing value in maintaining them.
The Modus audit and assurance practice regularly sees clients working through questions about what risk disclosures belong in their MD&A, independent of any specific climate rule. Getting the materiality analysis right remains a core financial reporting skill regardless of regulatory backdrop.
State-Level Rules Are Filling the Gap
The federal retreat has not halted state-level activity. California has enacted the most sweeping climate disclosure requirements in the United States, and those rules are on their own track.
California SB 253 (Climate Corporate Data Accountability Act)
SB 253 requires U.S.-organized entities with revenues exceeding $1 billion that do business in California to disclose Scope 1, 2, and 3 GHG emissions annually. The California Air Resources Board (CARB) approved implementing regulations in February 2026. The deadline for first-year Scope 1 and Scope 2 reporting was deferred to November 10, 2026; Scope 3 reporting is expected to begin in 2027.
California SB 261 (Climate-Related Financial Risk Act)
SB 261 applies to entities with revenues over $500 million doing business in California and requires biennial disclosure of climate-related financial risks aligned with the Task Force on Climate-related Financial Disclosures (TCFD) framework. SB 261 enforcement is currently stayed under a Ninth Circuit injunction issued November 18, 2025. Oral arguments occurred in January 2026, and a decision could come at any time.
The California rules are significant because of the revenue thresholds involved. Many mid-market companies with any California operations or customers could fall within scope. Companies in this category should be consulting their advisory team now to assess whether the California thresholds apply and what data infrastructure is needed.
The EU’s CSRD: A Separate Obligation for Companies with EU Operations
The Corporate Sustainability Reporting Directive (CSRD) is a European Union mandate that operates independently of anything the SEC does. Following the EU’s “Omnibus” simplification package, which received final Council approval in February 2026, the CSRD thresholds were revised upward. The current scope covers companies with more than 1,000 employees and more than EUR 450 million in annual net turnover operating in the EU. For non-EU parent companies, the rule applies where the parent generates more than EUR 450 million in EU turnover and has an EU subsidiary or branch generating more than EUR 200 million.
Companies already in the first wave of CSRD reporting began reporting on fiscal year 2024 information in 2025. The next wave’s reporting timeline has been pushed to 2028.
The CSRD uses European Sustainability Reporting Standards (ESRS) and requires “double materiality” analysis, meaning companies must assess both how sustainability issues affect their business and how their business affects sustainability matters. Assurance on sustainability disclosures is mandatory under the CSRD, creating a direct link to the attestation services that audit firms provide. The International Auditing and Assurance Standards Board (IAASB) published ISSA 5000, the first comprehensive global standard for sustainability assurance engagements. It applies to both limited and reasonable assurance and is effective for engagements covering periods beginning on or after December 15, 2026, with early application permitted.
What Finance Teams Should Do Now
Given the fragmented landscape, a waiting-for-certainty posture is increasingly costly. Several practical steps apply regardless of how the federal rule is ultimately resolved.
Map your disclosure obligations now. Assess whether California’s SB 253 or SB 261 thresholds apply based on your revenue and operations. If you have EU subsidiaries or branches, work through the CSRD thresholds. Federal irrelevance does not mean global irrelevance.
Establish a GHG emissions baseline if you have not already. Even if no current rule compels it, having Scope 1 and Scope 2 emissions data positions a company to respond to customer, lender, and investor requests. The data collection infrastructure required for SB 253 and the CSRD largely overlaps with what the SEC rule would have required.
Review your existing SEC disclosures for climate-related risk language. If your company has material exposure to physical climate risks (supply chain disruption, property in flood zones, commodity price sensitivity) or transition risks (carbon pricing, regulatory shifts, customer preference changes), those risks belong in your MD&A and risk factors under existing disclosure standards, independent of any specific climate rule.
Understand the assurance requirements ahead of time. California’s SB 253 and the CSRD both contemplate third-party assurance on GHG emissions data. Limited assurance differs from reasonable assurance in scope, procedures, and cost. Beginning with a limited assurance engagement is the common starting point, and planning for it early reduces friction at reporting time. Firms with AI-native audit capabilities can reduce the cost and turnaround time of this type of engagement by automating data tracing and source documentation.
For the primary source on the current status, the SEC’s rescission proposal page provides the proposed rule text, fact sheet, and related statements.
Frequently Asked Questions
What is the current status of the SEC climate disclosure rule?
The SEC climate disclosure rule was adopted in March 2024 and immediately stayed pending litigation. In March 2025, the Commission voted to end its defense of the rule. In May 2026, the SEC formally proposed to rescind the rule in its entirety. The public comment period closed August 3, 2026. A final rescission vote is expected in late 2026 or early 2027. The rule has never taken effect or been enforced.
Does the SEC climate rule still apply to my company?
No. The rule has been stayed since April 2024 and has never been enforced. The SEC is now in the process of formally rescinding it. However, existing SEC disclosure requirements still require companies to disclose material climate-related risks under Regulation S-K. The rule’s rescission eliminates the specific prescriptive format but not the underlying materiality-based obligation.
Why did the SEC decide to rescind its climate disclosure rule?
The current Commission, led by Chair Paul Atkins, concluded the rule exceeds the SEC’s statutory authority under the Securities Act of 1933 and the Exchange Act of 1934. The Commission also cited policy grounds: a materiality-based, registrant-specific approach better serves investors than a prescriptive climate-specific disclosure regime. Independent legal challenges from multiple states and industry groups reinforced the Commission’s position.
Are there any climate disclosure requirements that still apply?
Yes. California’s SB 253 requires annual GHG emissions disclosure from companies with over $1 billion in revenue doing business in California, with first reporting due in late 2026. California’s SB 261, which covers companies with over $500 million in revenue, is currently stayed by a Ninth Circuit injunction. The EU’s CSRD applies to companies with EU operations above revised thresholds. None of these are contingent on the SEC rule.
What is the difference between Scope 1, Scope 2, and Scope 3 emissions?
Scope 1 emissions are direct GHG emissions from sources owned or controlled by a company, such as combustion in company-owned boilers or vehicles. Scope 2 covers indirect emissions from purchased electricity, steam, heating, and cooling. Scope 3 covers all other indirect emissions across the value chain, including both upstream suppliers and downstream product use, and is generally the most difficult category to measure. The SEC’s final 2024 rule included Scope 1 and 2 but dropped Scope 3; California’s SB 253 requires all three.
Do I still need to prepare for climate-related assurance if the SEC rule is gone?
Potentially yes, depending on your jurisdiction and size. California’s SB 253 contemplates third-party assurance on GHG emissions data, starting with limited assurance. The EU’s CSRD mandates assurance on all reported sustainability information. Even absent a regulatory requirement, institutional lenders and investors increasingly request credentialed climate data. Planning for an assurance engagement before you are under a deadline saves time and cost.
Filed under: ESG & Sustainability