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SEC Climate Rule Withdrawn, States Step Up
Tim Mohin
14 Feb
The SEC’s acting chair confirmed that their climate rule would be withdrawn
State-level climate disclosure laws are picking up where the SEC rule failed
Trump’s policies are hurting clean energy manufacturing in red states
The growing business case for sustainability
1.5C limit established by the Paris Agreement exceeded
95% of companies failed to file their climate plans, UN extended the deadline
GreenBiz 2025 was like group therapy - sustainability professionals are nervous but resolute.
March 2022 feels like a generation ago. This is when the U.S. Securities and Exchange Commission (SEC) proposed its climate disclosure rule.
The rule had a tumultuous history: Initially, it required disclosure of Scope 1, 2, and 3 emissions as well as climate risk. More than 24,000 comment letters and 2 years later, the SEC issued a weakened final rule (removing Scope 3), which was immediately challenged in the courts. Perhaps sensing the shift in the political winds, the SEC stayed (paused) the implementation of the rule until after those cases were decided.
This week, as expected, the acting Chair of the SEC, Mark Uyeda, paused the SEC’s legal defense of the rule, indicating it will be withdrawn.
Uyeda said: “The Rule is deeply flawed and could inflict significant harm on the capital markets and our economy,” and that “financially material climate-related risks were already subject to disclosure under existing rules.” He referenced Trump’s regulatory freeze as a reason for withdrawing the rule.
Shivaram Rajgopal, a Columbia professor whose research showed the SEC’s rule would only modestly increase compliance costs while providing value for investors, said: “The action taken by the S.E.C. most likely signals the death knell for the climate change rule.”
While this is likely the end of the Federal rules on climate reporting, US states are rushing to fill the gap. In California, New York, and other states, new laws will require both public and private companies to report climate emissions and risks (including scope 3 emissions) as early as next year. Taken together, these new laws will have a similar impact to the failed SEC rule because they not only affect companies located in those states, they also affect companies doing business there. Considering that California’s economy is more than $4 trillion and New York adds another $1.8 Trillion…the impact will be similar, if not larger than the SEC rule.
Trump’s Policies Hurt Red States
Trump is moving quickly to fulfill his campaign pledges, and there are some immediate consequences.
Frozen clean energy funds are already having an impact on Inflation Reduction Act (IRA) investments, 80% of which went to manufacturing hubs in red states. The freeze puts clean energy projects at risk: Jason Walsh of the BlueGreen Alliance said, “I expect thousands of people to be laid off, I expect workers to be furloughed, and I expect construction projects to halt.”
Ford CEO Jim Farley was also critical of Trump’s policy to end EV subsidies and tariffs saying they will likely lead to mass layoffs and raise prices for consumers. The tariffs, in particular, “will blow a hole in the U.S. industry that we have never seen.”
The Business Case for Sustainability
There is a growing body of evidence pointing to the business benefits of climate and sustainability action. My company, BCG, released two reports in the last couple of months that show opportunities available to companies leading in the sustainable economy:
Cost of Climate Inaction report: Revealed that companies doing nothing could lose up to 25% of EBITDA by 2050, and a dollar spent today on climate action could return up to $19 by 2050.
Economic Growth Opportunities in a Greening World report: Found that addressing climate change could be a $11 trillion opportunity.
Supporting these figures, A recent CEO survey found that a third reported climate investments have resulted in increased revenue. Two-thirds say these investments reduced costs or did not cost anything. Plus, a new CEO survey from Workiva found that 97% of executives agree that sustainability is a competitive advantage, and 85% intend to disclose emissions despite political headwinds.
1.5C is Dead - Extension for Country Climate Goals
Two new studies found that the world has exceeded the 1.5°C warming goal established in the 2015 Paris Accord. Also, the deadline for countries to submit their Nationally Determined Contributions (NDCs) expired, with only 10 countries (less than 5%) releasing updated goals.
The UN extended the deadline until September to align with its synthesis report. UN Climate Chief Simon Stiell said, “Because these national plans are among the most important policy documents governments will produce this century, their quality should be the paramount consideration … Taking a bit more time to ensure these plans are first-rate makes sense.”
Global Insurance Crisis Deepens
Mounting costs from climate-related natural disasters are causing an insurance crisis. It was revealed this week that the insurer of last resort did not have enough money to pay all of their claims stemming from the LA wildfires. This forced state regulators to collect $1 billion from private insurance to cover the shortfall.
This unprecedented move from the so-called FAIR program, which was designed to help homeowners who could not afford to pay for private insurance, will inevitably push up premiums for Californians and will likely accelerate the exodus of insurers from the state.
SBTi 2.0 Delays
After last week’s news that Jeff Bezos’ Earth Fund would stop funding the Science Based Target Initiative (SBTi), the group announced another delay to the second version of their Corporate Net Zero Standard.
This is the second delay on the draft of the new standard, which was meant to be released late last year. The SBTi is establishing expert working groups to consult on five key topics in the revised Standard, conduct two public consultations, and pilot testing to ensure that the revision works for businesses and accelerates climate action.
Defiant GreenBiz
I just got back from another energizing GreenBiz event, where ~2,500 sustainability professionals gathered. Most were expressing confusion and trepidation over the rapid reversal of fortune. Some quipped that the meeting was a massive group therapy session. My own take was that this community is resilient and resolute…no one was quitting, and all were looking for new ways to advance sustainability.
A highlight was founder Joel Makower’s opening speech (see video from 25:50 onwards), where he encouraged the participants to fight the darkness and work for intergenerational change.
The views expressed on this website/weblog are mine alone and do not necessarily reflect the views of my employer.
Other Notable News:
Energy Transition
Sustainability Research
Net Zero
Trump 2.0
CSRD Adoption
Notable Podcasts:
In this week’s episode of Outrage and Optimism, the hosts reflect on the Paris Agreement on its 10-year anniversary. One of the hosts, Christiana Figueres, one of the driving forces behind the Paris Agreement, shares her experiences of the high-stakes negotiations and how the climate pact is now in jeopardy.
In this week’s episode of Bloomberg’s Zero podcast, host Akshat Rathi talks to the architect of The UK’s ambitious clean energy strategy. Chris Stark CBE, head of the UK’s Mission Control for Clean Power by 2030, spells out how the UK plans to meet the world’s most ambitious clean energy plan.
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