Swedish premium pension default fund, AP7, has urged the US Securities and Exchange Commission (SEC) not to proceed with the proposed removal of the climate disclosure rules adopted in 2024.

The fund argued that removing the rules would risk impairing investors’ ability to assess climate-related financial risks and make well-informed investment decisions.

On 3 June, the SEC proposed removing its climate-related disclosure rules, in an effort to “return the agency to its core mandate – in line with its legal authority – and restore a materiality-focused approach to securities regulation”.

Although the rules have not yet come into force due to ongoing legal challenges, they would require listed companies to provide standardised disclosures on climate-related risks, governance, greenhouse gas emissions and transition plans in their public reporting.

In its publication of the proposals, the SEC said the removal was due to the rules being considered to go beyond the authority’s statutory mandate and to entail costs disproportionate to the benefits.

AP7 is Sweden's largest pension fund and one of Europe's largest, managing approximately USD 150bn (SEK 1.5trn) in assets. More than 60 per cent of its equity holdings are in North American-listed companies.

Given the potential impact this change would have on the fund, AP7 wrote to the SEC, suggesting that removing these rules would be detrimental to AP7 and other long-term investors.

In particular, it argued that it would increase the risk that material climate-related risks go unidentified and unmanaged by issuers and make decision-useful information harder and more costly to obtain, impacting investors' ability to allocate capital efficiently and assess long-term risk.

“As a long-term institutional investor, we rely on high-quality corporate disclosures to assess risk, allocate capital, and fulfil our responsibilities to pension savers,” AP7 head of sustainability, Charlotta Dawidowski Sydstrand, said in the letter on behalf of the fund.

“Climate change presents material financial risks and opportunities that affect company performance and long-term returns. Climate-related information is integral to our investment decision-making, stewardship, and long-term risk management.

“We use it for security selection, inclusion and exclusion decisions across all equity mandates, monitoring corporate progress in the low-carbon transition, proxy voting, and evaluating physical, regulatory, and system-wide portfolio risks.”

She explained that AP7 supported the adoption of the climate-related disclosure rules because they would deliver the comparable, consistent disclosures the fund relies on, covering material climate-related risks and impacts, governance, greenhouse gas emissions (Scopes 1, 2, and 3), emissions reduction targets, transition plans, and scenario analysis, improving their usefulness for investment analysis.

Sydstrand noted that in AP7’s experience, climate-related disclosures from US companies are often less complete and comparable than disclosures from other jurisdictions, which forces AP7 to obtain, reconcile, and verify data through external providers and direct engagement, at significant cost.

European Pensions has reached out to the US SEC for a response.

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