USA Law and Practice Contributed by: Lisa Fontenot, Jennifer Broder, Per Chilstrom and Lothar Determann, Baker McKenzie
USD54 billion California Climate Commitment, a cap and trade programme and climate disclosure rules. In contrast, many states adverse to ESG have advanced a patchwork of rules opposing climate measures, led by Texas, which adopted a law precluding any finan - cial firm from doing business with Texas state entities if they boycott fossil fuels in their activities. A Texas federal court ruled earlier this year that the Texas law was unconstitutional. Due in part to the unclear future of various pro and anti-state ESG laws, state attorneys general from both sides are increasingly pursuing legal action against companies and organisations, using antitrust, fraud and consumer protection theories. Similarly, states, municipalities and private litigants are bringing wide- ranging actions against companies, asserting dam - age due to unlawful contributions to climate problems, and are challenging company ESG reports and state - ments as false or misleading. The growing success in the range of ESG-related cases will likely spur further growth in such actions. Local In the absence of federal activity and agreement among states, municipalities have assumed an out - sized role, advancing affirmative climate action. 300 mayors across the country have adopted the Paris Agreement goals. While there are significant differ - ences in the focus of these efforts, they tend to involve one or more of the following: • energy efficiency and building code requirements; • renewable energy goals; • transportation electrification and infrastructure; • resilience and adaptation measures; and • policy and financing tools.
AI. For example, cybersecurity risks increase signifi - cantly because threat actors leverage AI systems for ransomware and espionage attacks, and companies can also use AI systems to identify and cure vulner - abilities and protect themselves. Enterprises can lev - erage AI tools to generate custom software for their own use, which may reduce demand for standards software and affect vendors of SaaS and on-prem software, but software vendors can also leverage AI tools to reduce costs and customise software more effectively for customers. 8.2 AI Use-Related Risks Private sector companies remain largely free under US law to address AI use-related risks with govern - ance frameworks they consider appropriate from a business perspective. Many companies have estab - lished multi-stakeholder governance committees and review processes spearheaded by legal and compli - ance departments. Some have designated Chief AI Officers. Congress and several US states, including California, Colorado, New York, Texas and Utah, have enacted AI laws and regulations since 2024, with effective dates in 2026. The current US president has issued policy statements and executive orders opposing regulation. Under California’s Transparency in Frontier Artificial Intelligence Act (TFAIA), a narrowly defined group of “large frontier developers” must adopt and publish a frontier AI framework, updated annually, that describes how the large frontier developer approaches: • incorporating national standards, international standards and industry-consensus best practices into its frontier AI framework; • defining and assessing thresholds used by the large frontier developer to identify and assess whether a frontier model has capabilities that could pose a catastrophic risk, which may include multiple-tiered thresholds; • applying mitigations to address the potential for catastrophic risks based on the results of assess - ments; • reviewing assessments and the adequacy of miti - gations as part of the decision to deploy a frontier model or use it extensively internally;
8. Artificial Intelligence 8.1 Board Oversight of AI
Delaware law requires oversight of corporate risk, including risk from emerging technologies such as AI. Under general corporate and securities laws, pub - licly traded companies have to inform investors how they are affected by business opportunities and risks through technological advances, including related to
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