Hunton Insurance Recovery Blog

The SEC’s effort to rescind its 2024 climate disclosure rules marks a significant change in federal ESG regulation, but it should not be mistaken for a retreat from climate-related disclosure risk.

Background

Earlier this year, SEC staff submitted a proposed rule, titled “Rescission of Climate-Related Disclosure Rules.” The agency later told the Eighth Circuit in a litigation challenging the rule that it does not intend to renew its defense of the rules it had submitted. For companies and boards, however, the practical lesson is not that climate disclosure exposure has disappeared.

Even without specific SEC climate rules, existing antifraud principles still apply to ESG- and climate-related statements in securities filings, earnings materials, investor presentations, websites, and sustainability reports. If anything, the loss of a single federal framework may increase judgment calls about what is material, how allegations should be framed, and where disclosures should appear. That may create more room, not less, for securities litigation based on perceived criticism or inconsistencies.

Shifting Regulatory Landscape and Ongoing D&O Risks

Fragmentation remains. Many companies now face overlapping or potentially conflicting expectations across SEC filings, voluntary sustainability reporting, investor communications, US and European climate change laws.

Compounding the issue is that some of those regimes remain subject to legal challenge or political uncertainty. The absence of a uniform federal baseline may make it harder to maintain coherence across channels, and plaintiffs’ lawyers and regulators may test gaps between what a company says across different forums.

But those potential D&O exposures are not limited to issuer-level securities claims. ESG governance and climate-risk oversight can also implicate board-level fiduciary and derivative risks. Boards and management can still face individual claims from regulators and private litigants that need to be defended. The broader ESG environment has also generated substantial litigation and regulatory activity, underscoring that these issues remain active notwithstanding the SEC’s recent efforts to walk back proposed rules.

D&O Insurance Protections Remain

Directors and officers liability insurance can be an important risk-transfer tool for these risks. Policies can step up to provide critical defense for ESG-related shareholder litigation, securities claims, derivative suits, regulatory investigations focused on disclosures or governance, and allegations of board or officer oversight failures. 

But claims are not always straightforward. Potential threats to D&O coverage include pollution and bodily injury exclusions, narrow definitions of claim and loss, and limitations on protections for entities. Insurers are also paying closer attention to ESG risk in underwriting, and stronger ESG governance may improve terms or pricing, while weak practices may do the opposite. Companies therefore should review D&O wording carefully, assess possible coverage gaps, and coordinate with brokers and coverage counsel. 

Companies should treat the SEC climate rule rollback as change in landscape, as opposed to a marked shift in potential sources of D&O exposures. The good news is that risk transfer solutions for ESG-related risks remain, but only if policyholders take a proactive approach to assess and improve their current coverage to maximize recovery in the event of a claim.

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A modified version of this article originally appeared in Hunton’s Summer 2026 Sustainability Hot Topics newsletter. The full newsletter is available here.