How the SEC is stripping ESG oversight

The landscape of American finance is currently undergoing a tectonic shift as the US Securities and Exchange Commission (SEC) systematically dismantles the sustainability frameworks established over the last few years.

Under the leadership of Chair Paul Atkins, the agency has pivoted from a watchdog of ‘green’ claims to a vocal critic of what it deems ‘radical’ ESG agendas. This regulatory rollback, which gained significant momentum in late 2025 and early 2026, marks a transition toward a more permissive environment for corporations while simultaneously stripping shareholders of key oversight mechanisms.

A central pillar of this shift is the recent announcement regarding the 2023 Names Rule. Originally designed to combat greenwashing, this rule required funds with labels like ‘sustainable’ or ‘green’ to invest at least 80% of their assets in line with those claims. However, in February 2026, Atkins signalled a formal review to "weed out" such rules, citing high compliance costs and limited benefits. This move indicates a likely reduction in mandatory investment thresholds, potentially leaving investors with far less clarity on what their ‘sustainable’ portfolios actually contain.

The retreat from transparency extends to the courtroom. The SEC has effectively abandoned its landmark climate disclosure rules, which once mandated reporting on greenhouse gas emissions and climate risks. After the Eighth Circuit Court of Appeals placed the fate of these rules back in the SEC's hands in September 2025, the agency chose to stop its legal defence rather than follow the formal ‘notice-and-comment’ process required to rescind them. This tactical retreat creates a vacuum of accountability, leaving climate-related financial risks largely to the discretion of the companies themselves.

Shareholders are also finding themselves increasingly sidelined. During the 2025-2026 proxy season, the SEC announced it would stop issuing views on "no-action" requests—the traditional process that determines which investor proposals make it onto the ballot. This effectively allows companies to exclude shareholder proposals on climate or diversity with minimal fear of federal intervention. Commissioner Caroline Crenshaw sharply criticised this policy as "an act of hostility toward shareholders", noting that it strips investors of their primary lever for influencing corporate behaviour.

The SEC’s recent manoeuvres signal a total surrender to corporate interests. By dismantling the frameworks for ‘green’ labels and silencing shareholder voices, the agency is downgrading sustainability from a requirement to a mere recommendation. Ultimately, the SEC is swapping the pursuit of a sustainable future for the convenience of the present, leaving investors to navigate an increasingly volatile landscape without a clear map.