Will Financial Disclosure Deregulation Have Unintended Consequences?

The SEC moved quickly last week – but not quietly.

On Monday, May 4, 2026, the SEC submitted a proposal to rescind its March 2024 Climate-Related Disclosure Rules, which never took effect due to legal challenges, a move that aligns with the Trump administration’s broader climate stance. Then, on Tuesday, May 5, the SEC announced plans to make quarterly (10-Q) reporting optional. This has been a core feature of US markets since 1970, and its removal would bring the US closer to other major markets globally by moving towards biannual reporting. The goal is to ease the reporting burden and reduce the pressure on firms to deliver short-term results – but it also raises real questions about transparency and accountability.

Will the end of short-termism prevent the death of climate initiatives?
Investments tied to climate risk often require upfront capital and take time to pay off. A biannual reporting cadence may make it easier for firms to prioritize these decisions without being penalized for short-term performance dips.

There’s significant evidence to support this prediction. A 2025 British Journal of Political Science study by Jared Finnegan and Jonas Meckling highlights the role of “impatient capital providers”, including public markets, dispersed ownership and investor types that prioritize short-term returns. Organizations exposed to these pressures are more likely to oppose climate regulation, while private firms or those with more concentrated ownership tend to take a longer view. Even at the issuer level, high-dividend equities tend to reinforce short-term thinking over longer-term positioning.

The shift towards short-termism is stark. In the 1950s, the average holding period for public equities was around 8 years. By 2020, it had dropped to just 5.5 months. While changing reporting mandates won’t fix investor behaviour overnight, they may help enable longer-term, more strategic decisions.

This does not entirely absolve public firms from disclosing on climate risks
Public firms are still required to disclose material risks through SEC filings such as the 10-K, defined as risks with a “substantial likelihood that a reasonable shareholder would consider important”. Sustainability and climate risks can fall into this category. PwC’s Global Sustainability Reporting Survey 2025 found that 44% of respondents in North America noted increased external pressure to report on sustainability. Additionally, the California Climate Corporate Data Accountability Act (SB-253) will require covered entities to report Scope 1 and 2 emissions starting August 10, 2026. For risk and reporting teams, this means continuing to assess and disclose material financial risks, including climate and sustainability risks. Firms need to be prepared to navigate multiple regulatory requirements and investor expectations, or risk falling behind. Proactive alignment, credible data and clear communication are now table stakes for maintaining competitiveness.

To read more on trends in the climate financial data and analytics space, head over to the Verdantix Insights page.