The U.S. Securities and Exchange Commission (SEC) has formally abandoned efforts to finalise two major Biden-era rulemaking proposals: one aimed at enhancing ESG-related disclosures by investment funds and advisers, and another seeking to revise the shareholder proposal and resubmission process. The decision was revealed in the agency’s latest regulatory agenda update released Thursday.
These rules were among 14 proposed regulations withdrawn by the SEC last week, signalling a significant retreat from the climate and environmental, social, and governance (ESG) priorities of the previous administration. The ESG disclosure rule, introduced in May 2022, was intended to standardise and strengthen reporting on ESG strategies by requiring funds to disclose relevant information in prospectuses, annual reports, and brochures. It also sought to mandate greenhouse gas emissions disclosures from environmentally focused funds.
The SEC’s decision follows growing legal and political opposition to ESG-focused policies. The Commission had already ceased defending its high-profile climate risk disclosure rule in court earlier this year, after multiple states intervened to continue litigation. Similarly, a related Department of Labor (DOL) rule, which allowed retirement plan managers to consider ESG factors, is also being rescinded and rewritten.
Under the original ESG disclosure proposal, the SEC aimed to combat greenwashing and support investor comparability through more consistent ESG-related reporting. Congressional Democrats had pushed for its finalisation, positioning it as a companion to the SEC’s amended Names Rule, which requires funds to allocate at least 80% of assets to strategies reflected in their names. Enforcement of the Names Rule has now been deferred to mid- and late-2026, depending on fund size.
Alongside the ESG regulation, the SEC also withdrew a 2022 proposal to revise the shareholder proposal process. The rule would have rolled back thresholds set under the Trump-era SEC that made it harder for investors to submit and resubmit proposals. A recent federal court decision dismissed a challenge to the 2020 rule, paving the way for the SEC to revert to that earlier standard. With these withdrawals, the SEC appears to be aligning with the broader shift in federal regulatory priorities following the change in administration.
