
The News
The top US financial regulator wants to let one of its signature accomplishments of recent years die on the vine. The move’s immediate practical impact is limited, but its symbolic resonance is significant.
Mark Uyeda, acting chair of the Securities and Exchange Commission, said the agency will drop its legal defense of rules it adopted in the last months of Joe Biden’s presidency that requires many companies to publish information about their emissions and exposure to climate risk. The rules are embroiled in lawsuits brought by 25 Republican state attorneys general and lobbying groups, who argued they overstepped the SEC’s authority.
The agency’s withdrawal of support for the rules doesn’t guarantee their demise; a federal court is expected to rule on the lawsuits this year, and if it upholds them, the SEC would need to go through a lengthy bureaucratic process to dismantle them. And in practice, the SEC’s decision changes little, since the rules had not yet taken effect.
But it deepens the rift between the investors who see climate change as a major threat to their returns, and those who see climate disclosure as a scheme to unfairly punish fossil fuel companies.
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Tim’s view
Last week’s decision by the SEC — which is independent but currently controlled by Republican officials appointed by US President Donald Trump — was a predictable next step in a protracted anti-ESG backlash that has only become more prominent in the US since Trump retook office. Even under Biden, the rules barely made it to completion, and only after the SEC dropped a requirement to report Scope 3 emissions — those from companies’ supply chains and customers — that many climate-conscious investors viewed as essential.
Politics, and a renewed feeling across the economy that energy security is more important than sustainability, have sapped much of the public momentum behind climate disclosures that drove the SEC to take the issue up. The Net Zero Asset Managers initiative — the group of firms that presumably would be more inclined than anyone to push for climate disclosures — suspended its activities this year after its biggest member, BlackRock, dropped out.
And yet, the most likely next step in the saga of climate-conscious investing is that more companies will disclose their climate data, even if the SEC isn’t asking for it.
Climate-conscious investing may have gone quiet, but it hasn’t disappeared. Contrary to what the Republican AGs suing the SEC argue, ESG investing was never about fighting climate change, per se. It was about preparing for the financial risks posed by physical climate impacts and government policies to cut emissions. The physical risks are more obvious every day; and even though the current US administration has prioritized fossil fuels, most investors still recognize that companies with unrestrained carbon footprints are a risky long-term bet.
“Ignoring the economic realities of climate change doesn’t change them,” Ed Farrington, North America president for the asset management firm Impax, told Semafor. “Great companies are actually addressing these things head on. They’re not trying to sweep it under the rug. They see climate change for what it is, which is a material risk to their business.”
That view remains more widely held on Wall Street than the most vocal ESG opponents make it out to be. A range of investors with a combined $50 trillion in assets under management submitted comments to the SEC about the climate rules; of these, 95% were supportive, said Steven Rothstein, managing director of the Accelerator for Sustainable Capital Markets at the advocacy group Ceres. 92% of Fortune 500 companies already do some form of climate disclosure. And there are at least 35 other jurisdictions — including California, the European Union, Japan, and South Korea — that have introduced or are developing climate disclosure rules, and that together represent more than half of global GDP, Rothstein said. So by walking away from climate disclosure, the SEC is doing no favors for most companies.
That’s not to say that the SEC’s participation is redundant or unnecessary, said Kathy Fallon, director of the land systems program at Clean Air Task Force, an advocacy group. Without a clear US federal reporting standard, companies will face more headaches and costs trying to comply with a mishmash of other rules, and the overall quality of disclosures will likely be lower, she said: “If we leave it up to voluntary reporting, then there’s a higher risk of greenwashing.”
Know More
It’s a mistake for high-emissions companies to back away from decarbonization just because it’s going through a phase of political unpopularity, John Thieroff, a senior credit officer at Moody’s Ratings, argued in a report this week. And investors would be unwise to turn a blind eye.
“Long-term investors should be concerned by the widening implementation gap,” he told Semafor. “Companies with high carbon exposure that defer transition investment face greater exposure to stranded asset risk, carbon pricing, and weakened competitive positioning” when policy does eventually catch up to the reality of climate change.

Room for Disagreement
BlackRock’s Larry Fink, for one, doesn’t seem worried. Climate transition risk, which he used to highlight regularly, was absent from the latest edition of his annual letter to investors this week. Instead, he called for energy “pragmatism” and a renewed push for permitting reform.

Notable
- While some big asset managers are stepping back from their net zero commitments, a growing number of public pensions are stepping them up. Pension funds in the US, Europe, and Japan are providing a bulwark against companies’ attempts to scale back climate-related commitments.