USA Law and Practice Contributed by: Lisa Fontenot, Jennifer Broder, Per Chilstrom and Lothar Determann, Baker McKenzie
7. Environmental, Social and Governance 7.1 ESG Requirements
neys general and private litigants across the spectrum of ESG views have pursued lawsuits against volun - tary standard setters, financial entities, rating agen - cies and companies relating to their ESG activities and statements. As a consequence, companies and organisations are increasingly reviewing their ESG strategies, reports, disclosures and statements care - fully, to maximise business opportunities while mini - mising legal risks. Federal The federal government has largely withdrawn from the ESG regulatory space except for new prohibitions, restrictions and legal actions related to diversity and inclusion and guidance intended to discourage asset managers’ consideration of ESG in investment deci - sions. In addition to abandoning the SEC climate dis - closure rule, the Trump Administration has reversed most of the Biden Administration funding for climate and related decarbonisation and electrification infra - structure, and has withdrawn climate mandates in federal procurement and policies. USEPA has proposed reversing its previous endan - germent finding that climate emissions endanger public health and the environment, requiring them to be regulated. This important determination will end up in the US Supreme Court, and in the interim will cause confusion and likely additional litigation regard - ing whether and who has the authority to regulate cli - mate emissions. The Trump Administration has used various orders and other activities to enhance fossil fuel and coal production while opposing or denying permits for renewable projects, chilling the investment market for renewables. Finally, the Trump Administra - tion has increasingly sought to sidestep mandatory environmental and sustainability review requirements before proceeding with major projects, which has cre - ated major controversies, litigation and uncertainty. State The states are deeply divided, with wildly divergent ESG approaches barring specific activities and legally challenging ESG in multiple jurisdictions while other states have imposed affirmative obligations. Further complicating matters, key state laws across the spec - trum are mired in litigation. 24 states had adopted climate targets, led by California, which has created a
There are no specific ESG reporting requirements at the US federal level save for the continuing disclosure obligations mandated by the SEC conflict mineral dis - closure rule promulgated in 2012. The Trump Admin - istration has abandoned the SEC climate disclosure rule and recently proposed to formally rescind the rule, which will ultimately be the subject of litigation. As a result, public companies are currently obligated to disclose ESG risks, opportunities or performance information only if they fall within the scope of the SEC’s overall materiality disclosure requirement. California has adopted two climate disclosure rules, and multiple states are considering similar rules. The Climate Corporate Data Accountability Act (SB 253) requires any public or private company that does busi - ness in California and has more than USD1 billion in global revenue to disclose annually its Scope 1 and 2 climate emissions to the State beginning on 10 August 2026 for calendar year 2025, and Scope 3 emissions beginning in 2027. An independent third party limited assurance review of the data is required and must be disclosed. Greenhouse Gases Climate-related financial risk (SB 261) requires any public or private company that does business in Cali - fornia with more than USD500 million in global rev - enue to prepare a climate financial risk report biannu - ally, beginning on 1 January 2026, which is consistent with IFRS climate disclosure standards (TCFD) or the equivalent and is posted on the company’s website. On 18 November 2025, the US Ninth Circuit Court of Appeals stayed the rule pending its ruling on litiga - tion challenging the legality of the rule. A decision is expected in the near term and also may have an effect on the scheduled implementation of SB 253. 7.2 ESG Developments The US ESG landscape reflects conflicting, uncer - tain and evolving developments on the federal, state and local levels. Most recent laws and regulations are embroiled in litigation with unclear outcomes and impacts. As a result of this uncertainty, state attor -
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