SEC Climate Disclosure Rule: Current Status and What to Know in 2026

On January 20th, 2025, US President Donald Trump revoked an executive order issued by his predecessor that required federal agencies to assess climate-related risks to the country’s economy. In March 2025, the SEC announced that it had voted to end its legal defense of the disclosure rule in ongoing court proceedings. This signaled a definitive pivot away from the mandatory reporting framework as originally envisioned.

The US Securities and Exchange Commission (SEC) introduced the Climate-Related Disclosure Rule in March 2024, mandating organizations to disclose their climate-related risks, greenhouse gas (GHG) emissions and financial impacts from extreme weather events.

However, regulatory developments, legal challenges and political shifts have since effectively stalled the federal mandate. While the SEC has not formally rescinded the rule, it is no longer moving toward implementation or enforcement in its current form.

What is the SEC Climate Disclosure Rule?

The SEC climate disclosure rule mandates that publicly traded organizations include comprehensive climate-related information in their annual reports and registration statements. The rules reflect the SEC’s efforts to respond to increased investor demand for consistent, comparable and reliable information about the financial effects of climate-related risk on corporate operations and how those risks are being managed. This rule requires public organizations to disclose:

Governance & Risk Management: Organizations must outline how their board and executives oversee and integrate climate-related risks into business operations, strategy and financial planning.
GHG Emissions Reporting: Organizations must report Scope 1 (direct emissions) and Scope 2 (indirect emissions from purchased electricity), with specific disclosure requirements based on materiality for large accelerated filers.
Financial Statement Impacts: Organizations must disclose climate-related costs, including carbon offset purchases, renewable energy credits and financial losses due to extreme weather events.

SEC Climate Disclosure Rule And Scope 3 Reporting

Although Scope 3 (supply chain) emissions are excluded from the rule, primarily due to industry opposition surrounding potential compliance complexities, the SEC maintains that organizations must still disclose material supply chain risks if they have a “significant impact” on financial performance. What constitutes a significant impact has not been defined.

Why the SEC Disclosure Rule Matters for Businesses

The SEC climate disclosure rule is a strategic regulatory shift aimed at bringing the US in line with global ESG reporting standards, such as the EU Corporate Sustainability Reporting Directive (CSRD), which are shaping corporate disclosure worldwide.

Beyond regulatory alignment, the rule aims to improve investor confidence. Standardized disclosures enable investors to assess climate-related risks across industries, compare organizations more effectively and make informed capital allocation decisions. The knock-on effect is reduced greenwashing concerns and greater corporate accountability for climate commitments.

Even with federal enforcement paused, the SEC’s framework can be seen as the blueprint for voluntary investor requests and state-level mandates.

SEC Rule Legal Challenges and Regulatory Retreat

Since its initial adoption, the SEC rule has been subject to several legal challenges and, ultimately, a judicial stay. In March 2025, the SEC officially ended its defense of the rule in the Eighth Circuit, suspending enforcement of the federal mandate.

In this vacuum, individual states are stepping up. New York, New Jersey, Colorado and Illinois are attempting to introduce laws requiring large businesses to report GHG emissions. Meanwhile, California’s landmark climate disclosure laws, SB 253 and SB 261, continue to move forward despite their own legal hurdles.

Climate Disclosure Legal Challenges

Shortly after the SEC finalized the climate disclosure rule in March 2024, several business groups, industry associations and Republican-led states filed lawsuits challenging its legality. These lawsuits concerned two main arguments:

Regulatory Overreach: Opponents argued that the SEC exceeded its authority by mandating climate-related disclosures, contending that Congress should determine such requirements, rather than an independent regulatory agency.
Economic Burden on Organizations: Business groups claimed that climate disclosures impose high compliance costs, particularly for mid-sized organizations and industries reliant on carbon-intensive operations.

In response, the Eighth Circuit Court of Appeals issued a temporary stay. By March 2025, the SEC’s decision to walk away from the defense effectively ended the rule’s path to implementation. While the federal mandate remains in limbo, state and international regulations still demand climate-related disclosures, requiring organizations to be agile in their climate reporting strategies.

Impact of the Trump Administration

Shortly after assuming office, President Trump revoked the executive order requiring federal agencies to assess climate-related risks to the US economy. This move, alongside withdrawing the US from the Paris Climate Agreement, aligned with a broader deregulatory agenda that claims to reduce the administrative burden on American businesses.

The SEC’s leadership shifted significantly to reflect this change. In February 2025, Acting Chair Mark Uyeda paused the agency’s legal defense of the rule, questioning the SEC’s authority to mandate climate reporting. This trajectory was solidified on February 11, 2026, when Chairman Paul Atkins testified before the House Financial Services Committee. His words pointed to a materiality reset, advocating for a disclosure framework that prioritizes core financial data over what he characterized as “regulatory noise.”

While these actions have effectively stalled the climate disclosure rule at the federal level, they have also created a more complex, fragmented environment for the private sector. In the absence of a unifying national framework, organizations must instead navigate numerous state-level mandates and global requirements. For companies operating across multiple jurisdictions, this decentralized approach carries the risk of higher operational costs and significant inefficiencies as they attempt to reconcile competing reporting standards.

Compliance & The Path Forward in 2026

While the SEC rule remains fully suspended at the federal level, organizations cannot afford to take a “wait and see” approach to climate data. Major investors and state-level authorities have moved forward with distinct mandates, making proactive reporting critical for maintaining market access and meeting stakeholder expectations.

Align with International and State-Level Standards

Even with the SEC rule stalled, businesses must still comply with climate disclosure regulations at the state and international levels. A growing number of jurisdictions are implementing strict reporting requirements, forcing organizations to adopt more transparent and standardized sustainability practices to stay competitive.

California’s SB 253 and SB 261 are currently the primary drivers for US-based companies. Following the finalization of regulations in February 2026, SB 253 now has a firm deadline: large enterprises doing business in California must report their Scope 1 and Scope 2 emissions by August 10, 2026. Scope 3 reporting is set to follow in 2027. Meanwhile, SB 261 (climate-related financial risk) is currently under a temporary judicial stay from the Ninth Circuit, though companies are encouraged to remain “publish-ready” as a ruling could resume enforcement at any time.

Internationally, the EU CSRD remains the most comprehensive global standard. Following the Sustainability Omnibus update in early 2026, the EU raised its reporting thresholds to capture only the largest firms, specifically those with over 1,000 employees and €450 million in net turnover. Despite these higher thresholds, the core obligation of double materiality remains. In simple terms, this means companies must report on two fronts:

Financial Materiality: How climate change impacts the company’s own value and financial health.
Impact Materiality: How the company’s business activities actually impact the environment and society. This “two-way street” of reporting ensures that sustainability data is as rigorous and transparent as traditional financial reporting.

Enhance GHG Emissions Tracking

Even though the SEC climate disclosure rule is currently suspended at the federal level, businesses cannot afford to overlook the full extent of their carbon footprint. Investors, customers and global regulators are increasingly demanding comprehensive emissions reporting. Organizations must focus on building GHG emissions tracking processes that go beyond basic compliance and align with international best practices.

FAQs

Q: Is the SEC Climate Disclosure Rule currently being enforced?

A: No. The SEC climate rule is currently under regulatory suspension. Following the SEC’s March 2025 vote to end its legal defense, the Eighth Circuit held all related litigation in abeyance. While the rule remains “on the books,” the current SEC leadership has ceased implementation and signaled a pivot toward a voluntary, principles-based framework.

Q: What are the 2026 thresholds for the EU Corporate Sustainability Reporting Directive (CSRD)?
A: Under the 2026 Sustainability Omnibus update, the EU significantly narrowed the scope of the CSRD to focus on the largest enterprises. The current mandatory thresholds for U.S. and non-EU multinationals are:

Parent Company Revenue: Over €450 million in net turnover generated within the EU for two consecutive years.
EU Subsidiaries: At least one EU branch or subsidiary with a net turnover exceeding €450 million.
Employee Count: For EU-based groups, the threshold has risen to 1,000 employees.

Q: Are there penalties for non-compliance with California’s climate disclosure laws?

A: Yes. Despite the SEC rule pause, California’s deadlines remain in effect.

SB 253 (Emissions): Administrative penalties can reach up to $500,000 per reporting year for failure to file or for significant misstatements.
SB 261 (Climate Risk): Penalties are capped at $50,000 per reporting year.
Note: For the initial 2026 cycle, CARB has indicated that it may exercise enforcement discretion for companies that demonstrate a “good faith effort” but face data-collection hurdles.

Q: Can my company use a single report for both the EU (CSRD) and California?

A: Generally, no. While the data overlaps, the formatting and standards differ.

California (SB 253) requires a standardized report submitted to the state’s digital registry, primarily focused on GHG emissions data.
The EU (CSRD) requires a broader sustainability statement integrated into the management report, following ESRS standards and the principle of double materiality.

While you can use the same underlying carbon inventory for both, the final filings must be customized to each jurisdiction’s requirements.