Introduction

As of printing, the future of sustainable finance and corporate law in the United States remains a work in progress. This research traces the trajectory of two (2) major US sustainability initiatives: the Securities and Exchange Commission (SEC) effort to mandate climate-related risk disclosures in public company filings, and California’s mandates requiring climate-related risks and greenhouse gas emissions reporting. Although both initiatives faced successful challenges, the unique features of the US regulatory structure offer possibilities for experimentation, innovation, and incremental regulatory reform.

Background to sustainability disclosure in the United States

Sustainability disclosure in the US began with an extensive system of voluntary reporting. In 2024 (3), 94% (3) of Russell 1000 (3) companies and 99% (3) of the S&P 500 (3) published a sustainability or ESG report. The impact of these disclosures is reflected in the fact that, as of July 31 (4), 2024 (4), 95% (4) of S&P 500 (4) companies disclose Scope 1 (4) and Scope 2 (4) emissions, and approximately 79% (4) disclose their Scope 3 (4) emissions. Despite widespread adoption, critics argue that voluntary disclosure lacks comparability across issuers and reliability, as sustainability reports are not filed with the SEC.

The rise and fall of the Sec climate disclosure rule

The SEC proposed its first climate-specific disclosure rule in March 2022 (7), seeking to mandate specific environmental disclosures in annual reports. The proposal sought to require issuers to disclose greenhouse gas emissions and their climate-related governance, strategy, and risk management policies. The proposed rule prompted a record number of comment letters. The final rule reduced burdensome elements, notably narrowing Scope 3 (8) disclosure requirements, and explicitly adopted financial materiality qualifiers.

Upon adoption, several states, industry groups, and trade associations filed suit. The SEC imposed a stay of the rule before its effectiveness to avoid compliance uncertainty. On March 27 (9), 2025 (9), the Commission formally voted to stop defending the rule and instructed SEC counsel to withdraw from the litigation. Shortly thereafter, 18 (9) states and the District of Columbia moved to hold the consolidated case in abeyance. The rule is currently in legal limbo due to the broader political backlash against ESG and the institutional limitations of the SEC.

California enacts climate disclosure laws

On October 7 (19), 2023 (19), California enacted three (19) landmark climate-related disclosure laws: the Climate Corporate Accountability Act, the Climate Related Financial Risk Act, and the Voluntary Carbon Market Disclosures Act. By enacting this legislation, California became the first US state to mandate corporate climate disclosure. Industry groups challenged the suite of laws. In November 2025 (20), the Ninth (20) Circuit Court of Appeals issued a preliminary injunction, staying the enforcement of SB 261 (20).

The promise and limitations of federalism

Given the inability of the federal government to address climate disclosure, states have stepped in to fill the void. A federalist climate disclosure system allows states to act more quickly than the federal government, to experiment with different approaches, and to tailor disclosure regimes to local needs. However, only a national regime can subject companies to a single national standard and overcome a patchwork of differing state regulations.

Conclusion

The current regulatory and political limbo regarding sustainability disclosure in the US creates an exceedingly difficult environment for issuers, who face inconsistent disclosure requirements and political backlash. However, the shifting regulatory landscape is not undermining the robustness of climate disclosure yet. Large public companies have already invested resources into building sustainability reporting systems and are attempting to stay out of the political fray by removing terms like ESG or net-zero from reports while still producing climate disclosures.