The acting chair of the Securities and Exchange Commission, Mark Uyeda, took the first step on Tuesday to rolling back a rule that would require thousands of publicly traded companies to provide investors with detailed information about the impact of their businesses on climate and the environment.
Mr. Uyeda said in a statement that he was directing the S.E.C.’s legal team to inform a federal appellate court that the regulator was pausing its defense of the so-called climate change disclosure rule. The regulation, adopted last year, is being challenged in court by a number of business groups and state attorneys general.
The polarizing measure requires companies to identify the impact of their business activities on the climate, in particular the creation of greenhouse gases that have contributed to the warming of the planet. Companies must provide data in regulatory filings that will help investors quantify the impact and risk to their investment in a company. Companies also most provide information about the financial cost of steps it is taking to minimize the climate impact of its business activities.
The rule aims to give investors a clearer picture of the risks that companies might be exposed to because of climate change and its effects, including droughts and wildfires, changes in government environmental policies or consumers’ declining interest in products that contribute to global warming.
But critics have noted that many large companies already provide investors with information about greenhouse gas emissions, rendering the rule unnecessary and overly burdensome.
The decision by the S.E.C. to tell the U.S. Court of Appeals for the Eighth Circuit to pause any further proceedings in the matter is an indication that the regulator may eventually move to rescind the rule or modify it.
Mr. Uyeda said in the statement that as a commissioner since 2022, he had opposed the rule and believed it was “deeply flawed” and could harm the economy. He said the S.E.C. needed more time to consider its options before any more proceedings could take place before the appellate court.
He also noted that he did not believe the S.E.C. had the authority to pass such a sweeping regulation. It’s a legal argument that opponents of the rule have raised in the courts.
The climate change disclosure rule was one of the signature achievements of the most recent S.E.C. chair, Gary Gensler. Mr. Gensler was often criticized for pushing the rule during his appearances before Congress.
Tuesday’s step to stymie the climate measure was the latest step in the Trump administration’s efforts to undo Mr. Gensler’s legacy at the S.E.C.
In addition to the climate rule, Mr. Uyeda has moved quickly to roll back another hallmark of Mr. Gensler’s tenure: his aggressive approach to regulating the crypto industry. The S.E.C. recently began scaling back a team of lawyers and investigators responsible for bringing dozens of enforcement actions against crypto companies.
The climate rule was challenged in court almost as soon as it was enacted. First proposed in 2022, it was the subject of heated debate, and the S.E.C. received more than 24,000 comments on the rule.
The S.E.C. agreed to delay the rule from going into effect during litigation, which began last year. The regulation is being challenged by a number of groups including 19 state attorneys general from Republican-controlled states and the U.S. Chamber of Commerce.
A Chamber representative said that the organization welcomed the move by the S.E.C. to “re-evaluate” the climate rule.
Shivaram Rajgopal, a professor at Columbia Business School, said the action taken by the S.E.C. most likely signals the death knell for the climate change rule. His research showed that the rule would only modestly increase company compliance costs while making investors more comfortable with their investment in a particular company, he said.
The S.E.C. has taken a similar step in a crypto case.
On Monday, the agency filed a joint motion to pause, for 60 days, any action in a pending enforcement action the regulator filed against Binance, the big crypto trading platform, and the firm’s founder Changpeng Zhao, better known as C.Z. The court filing said the work of a newly formed S.E.C. crypto task force “may impact and facilitate the potential resolution of this case.”
Mr. Uyeda established the crypto task force to come up with a regulatory framework for dealing with digital assets that is not dependent on bringing enforcement actions to control the growth of the industry.
In 2023, under Mr. Gensler, the S.E.C. sued Binance and C.Z. in a 136-complaint that charged them with mishandling customer funds and lying to regulators and investors about the firm’s operations. Binance has denied the allegations and raised questions about the regulator’s authority to oversee crypto.
Last summer a federal judge rejected most of the arguments in Binance’s motion to dismiss the lawsuit, though she did dismiss some of the claims filed by the S.E.C.