Op-Ed: The SEC killed a rule. It didn’t kill the mandate

The public comment period on the SEC’s proposal to rescind its 2024 climate-disclosure rules closed this past Monday, after 60 days. The original rule drew more than 14,000 comments when it was proposed in 2022; its unwinding has moved with considerably less fanfare.

The rescission is correct on the law and overdue as policy. It also solves a narrower problem than the one that pension trustees, asset managers, and a growing number of corporate boards actually created. The SEC never had to finalize a climate rule for institutional fiduciaries to start treating climate risk as a mandate that sits above ordinary duty of loyalty. Rescinding a disclosure regime that never took effect closes one door. The load-bearing one stays open.

I’ve spent a career structuring capital for institutional and ultra-high-net-worth clients, and more recently sitting across the table from trustees defending investment decisions as an expert witness. The pattern holds across every deposition: the SEC never forced a single pension board to adopt a net-zero target or a climate-transition index. Trustees did that on their own, then pointed to Washington’s regulatory drift as cover for a decision state trust law already governed.

The mechanics of the rescission are straightforward. The SEC adopted its climate rules on March 6, 2024, by a 3-2 vote, requiring most public companies to disclose material climate risks, governance processes and, for larger registrants, certain greenhouse gas emissions. The Commission stayed the rules a month later pending litigation consolidated in the Eighth Circuit, a challenge led by the U.S. Chamber of Commerce alongside the Texas Association of Business, the Longview Chamber of Commerce, and a coalition of Republican attorneys general. The rules never took effect. In March 2025, the Commission voted to end its defense of them; last September, the Eighth Circuit ordered it to either reconsider the rules through notice-and-comment rulemaking or resume defending them in court. The May 29 proposal is that reconsideration. It rests on two arguments: that the Securities Act and Exchange Act don’t authorize disclosure mandates untethered from the specific items Congress identified, and that even if authority existed, the rules impose costs the informational benefit doesn’t justify and stray from the SEC’s core mandate of protecting investors and facilitating capital formation.

Both arguments are sound, and neither reaches the actual governance problem. Federal securities law asks what a company must tell investors. State fiduciary law asks how directors and trustees must decide. Rescinding the first doesn’t touch the second, and conflating them is how a compliance debate turned into a five-year detour from the point.

Delaware corporate law, which governs the plurality of public companies, gives directors wide latitude under the business judgment rule: a presumption, reaffirmed in In re Walt Disney Co. Derivative Litigation, that a decision made in good faith, without conflict, and on an informed basis serves the corporation’s interest. That presumption protects the process, not a particular outcome, and it has never required directors to ignore climate risk that’s actually material, whether from physical exposure, transition cost or litigation. It has also never extended to bad faith, self-dealing, or the kind of uninformed decision-making Delaware’s Caremark line of cases treats as an oversight failure the theory under which a climate-driven expenditure detached from any documented analysis of cost, benefit, and alternatives would face its sharpest scrutiny. A board can rationally justify emissions reductions tied to insurance costs, regulatory exposure, or customer demand. A board cannot rationally justify them as an end in themselves and call it stewardship.

Public pension trustees operate under a tighter standard than corporate directors do, not a weaker one. California’s Government Code requires CalPERS trustees to act “for the exclusive benefit of the members and beneficiaries of the system”; ERISA imposes the same rule, in nearly identical language, on private plans. Neither statute changes because the SEC withdraws a disclosure form. Yet CalPERS’s $5 billion allocation to a custom FTSE Climate Transition index and its 2050 net-zero commitment predate the SEC rule, will outlive its rescission, and were never required by either. Asset managers show the same pattern in reverse: BlackRock’s own stewardship reporting shows the firm supporting more than 40% of environmental and social shareholder proposals in 2021 and under 2% by 2025, a swing the firm has attributed to its own materiality analysis, not to any change in federal disclosure obligations. The rule was never the wizard behind climate governance. It just supplied a curtain, and a fair number of fiduciaries were happy to stand behind it.

None of this means the SEC was wrong to retreat, and the Commission deserves credit for reading Schedule A of the Securities Act the way it’s actually written rather than the way five years of advocacy groups wanted it to. But the comment period closing this week should mark the start of a different conversation, not the end of one. If climate risk is financially material to a given company or a given portfolio, the duty to weigh it was already there under Harvard College v. Amory’s two-century-old prudent-man standard, no federal rule required. If it isn’t material, no disclosure form was ever going to make pretending otherwise a legitimate use of someone else’s money. The SEC just admitted it can’t compel the first case by regulatory fiat. It’s past time trustees admitted they were never entitled to manufacture the second.