Written by Leo Martin, staff writer and second-year MPA student. Edited by Jacob Carson, Executive Editor and second-year MPP student.

On March 27th, 2025, the Securities and Exchange Commission (SEC) voted to end the defense of the Biden-era climate disclosure rules, which required publicly traded firms to disclose greenhouse gas emissions and climate-based risks associated with their businesses. The SEC justified its decision in part by citing the costs of gathering and presenting the information to potential investors, describing the SEC rules as “costly and unnecessarily intrusive climate change disclosure rules.” Yet by its decision, the SEC has actually made it harder for firms to provide investors with valuable information. The SEC has scrapped a national reporting requirement and left behind a fragmentary patchwork of competing, and at times contradictory, state-level requirements. With the SEC rules gone, it will be harder for investors to make decisions that are not only good for the planet but also their bottom line.

One benefit of the SEC’s Climate Disclosures Rules was to require publicly traded firms to provide climate risk information. For businesses, climate change is an expensive proposition as severe weather and rising sea levels expose them to billions of dollars in damages. A report from the Potsdam Institute, a climate impact research institute, estimated $38 trillion in damages from climate change by 2050 and a 19% reduction in overall GDP. Sector by sector, we can see more directly how climate change will cost businesses. A 2024 CBO report estimated that if sea levels rose by 2 feet, there would be $250 billion worth of damage to residential property. Investors do not need forward-looking projections to see the risks posed by climate change. The 2019 floods in the Midwest United States resulted in a $4.5 billion loss in agricultural sales. With climate disclosure rules, investors who wanted to minimize their exposure to the consequences of climate change would have information about potential risks, enabling them to minimize risks and better protect their investments.

Investors would benefit not only from risk identification but also from the fact that firms that disclose climate risks produce more accurate earnings projections. According to Steven Rothstein, the Managing Director of the Ceres Accelerator for Sustainable Capital Markets, “Investors believe the more information they have about companies they invest in, the better investment decisions they can make.” A 2025 research paper found that between 2009 and 2020, S&P 500 firms that produced high-quality carbon disclosure and performance disclosures were more accurate in predicting earnings, as disclosures “reduce[d] firm-level uncertainties and result in more accurate forecasts.” Firms that investigate climate change risk and climate disclosure have more information and awareness of their operations, their risk profile, and long-term challenges. In addition to having this valuable information is the benefit of performing this kind of internal analysis: the ability to gather and analyze information. This is why the nonprofit Environmental Defense Fund, a research institute championing market-based policies to combat environmental issues, argued that physical climate risks surveys were “a critical lever to help companies position themselves for long-term, profitable growth.”

The need to minimize risks, improve earnings forecasting, and attract investment has created a clear business case for releasing climate change risk information. Yet the SEC’s decision has not only removed the federal requirement; it also made voluntary disclosures harder. Firms will no longer need to meet an SEC requirement; they will need to meet contradicting state requirements. In 2023, California passed SB 253, which requires publicly and privately traded firms with annual revenue over $1 billion in California to disclose their greenhouse gas emissions and publish biennial climate-related financial risk reports. Currently, Colorado and four other states are considering following suit. At the same time, states such as Texas have passed legislation preventing the state from doing business with or investing government funds in financial institutions and companies that discriminate against the fossil fuel sector. A firm that disclosed it was minimizing investments in the fossil fuel sector could be subject to a lawsuit from the state of Texas for boycotting the sector, using the disclosure statements as evidence. An article in the peer-reviewed academic journal Insights: The Corporate & Securities Law Advisor argued that companies will now need to “craft compliance plans and disclosures that minimize the risk of enforcement from states that could view such disclosures as boycotting certain energy companies or otherwise contrary to state law.” It would mean that firms need to incur the costs of completing filings that meet the requirements of a state such as California, and that does not constitute boycotting fossil fuel companies if they do not wish to face loss of business and investments from the state of Texas.

The SEC’s abandonment of Climate Disclosure Rules has created a situation in which firms have an incentive to disclose the risks posed by climate change, yet face competing and contradictory regulatory demands. They will need to meet both state-level climate disclosure requirements and avoid lawsuits from states with laws against boycotting fossil fuel companies. With a federal standard, it would be easier for firms to disclose climate risk information, and it could lead to more accurate earnings projections. Investors would be able to invest in firms less exposed to climate change risks and could have greater confidence that firms will perform as anticipated. Climate disclosure rules would create a more efficient market by enabling investors to allocate capital to better-performing companies and, at the same time, reduce their contributions to climate change and exposure to its economic costs. The SEC should reverse its decision and reinstate the Climate Disclosure Rules, if for no other reason than for the good of investors and businesses.

Photo by Lonely Blue on Unsplash

The views expressed in Policy Perspectives and Brief Policy Perspectives are those of the authors and do not represent the approval or endorsement of the Trachtenberg School of Public Policy and Public Administration, the George Washington University, or any employee of either institution.