As readers know, in recent years, red state politicians and other litigants, in service of an anti-ESG backlash agenda, have launched a series of suits challenging the sustainability practices and policies of companies, asset managers, and other market participants. On May 20, 2026, the Texas Attorney General (AG) launched the latest of these kinds of suits, filing an action against proxy advisory firm Institutional Shareholder Services (“ISS”), alleging the company deceptively prioritized undisclosed ESG factors over objective financial analysis.  The lawsuit was filed in conjunction with similar state court lawsuits brought in Nebraska, Iowa and West Virginia. 

The Texas AG’s complaint against ISS reflects the now well-established trend of anti-ESG litigation in which political officials and activist groups target market participants over sustainability-related practices and policies. In recent years, The D&O Diary has frequently examined this evolving ESG backlash, including litigation, regulatory scrutiny, and political efforts challenging climate initiatives, diversity programs, and sustainability-focused governance practices.

In a separate but arguably related development, ExxonMobil recently launched a public campaign criticizing major proxy advisory firms ISS and Glass Lewis over alleged conflicts of interest tied to shareholder voting recommendations and corporate governance disputes.  Together, these developments underscore how ESG-related disputes increasingly are migrating beyond sustainability disclosures themselves and into broader battles involving shareholder voting, fiduciary duties, governance oversight, and corporate accountability.

The following discusses the Texas AG’s lawsuit against ISS, Exxon’s follow-on commentary and potential D&O exposures stemming therefrom.

The Allegations Against ISS

Texas’ Attorney General filed the complaint in Collin County District Court, alleging that ISS falsely represented its services as objective and financially focused while advancing ESG-oriented goals through its voting recommendations and governance frameworks. The suit alleges violations of the Texas Deceptive Trade Practices Act and seeks injunctive relief, disclosure requirements, and civil penalties.

The complaint focuses heavily on ISS’s public representations that its proxy research is “independent and objective” and designed to help investors make informed financial decisions. Texas contends those representations are misleading because ISS allegedly incorporates ESG priorities into its analyses without adequately disclosing the extent to which those considerations influence voting recommendations.

Among other things, the complaint challenges ISS’s “Climate Accountability” voting policy, under which ISS may recommend voting against directors at companies it believes have failed adequately to address climate-related risks. The lawsuit also targets ISS’s support for climate-related shareholder proposals, board diversity expectations, and ESG-oriented governance scorecards.

The complaint specifically references ISS’s “QualityScore” and “Climate Awareness Scorecard,” which evaluate companies using environmental, social, and governance metrics, including greenhouse gas emissions and climate-related disclosures. Texas alleges that these frameworks demonstrate that ESG considerations have become embedded within ISS’s governance recommendations.

Texas also alleges that ISS failed to disclose ties to ESG-oriented organizations and investors, including the Interfaith Center on Corporate Responsibility and Deutsche Börse’s participation in the Net Zero Financial Service Providers Alliance. The lawsuit further claims that ISS’s ESG priorities conflict with shareholder financial interests and cites alleged ESG fund underperformance and changing political attitudes toward climate initiatives as evidence supporting that argument.

While ISS has indicated it intends to vigorously contest the allegations, the broader significance of the lawsuit lies in the continued expansion of anti-ESG litigation theories into the governance infrastructure surrounding public companies.

Exxon v. ISS and Glass Lewis

In a separate development that may provide important context for the Texas AG’s lawsuit, the Wall Street Journal recently reported on ExxonMobil’s criticism of proxy advisory firms ISS and Glass Lewis after the firms’ recommended shareholders vote against Exxon’s proposed reincorporation from New Jersey to Texas. Exxon argued the firms failed to disclose potential conflicts arising from their simultaneous litigation against Texas Attorney General Ken Paxton over Texas legislation requiring proxy advisors to disclose when voting recommendations are influenced by nonfinancial considerations, including ESG-related factors.

Exxon publicly questioned whether proxy advisors exercising enormous influence over shareholder voting outcomes could remain “independent” while suing a state whose laws directly affect their business models and disclosure obligations. Proxy advisors, meanwhile, argued that Exxon’s proposed move to Texas could weaken shareholder rights and make it more difficult for shareholders to hold directors and officers accountable.

Discussion

Over the last several years, ESG litigation largely has not involved traditional “greenwashing” claims but instead has increasingly reflected political and regulatory backlash against sustainability-focused business practices themselves. As previously discussed on The D&O Diary, this backlash has taken multiple forms, including state anti‑ESG legislation, ERISA fiduciary duty lawsuits challenging ESG-oriented investment decisions, and securities suits targeting companies over ESG and DEI-related business strategies.

One of the most important D&O implications of the ISS litigation is that companies, governance professionals, and financial institutions increasingly may face scrutiny regardless of which side of the ESG debate they occupy. A company that heavily emphasizes ESG initiatives may face accusations of subordinating financial performance to political ideology. At the same time, companies that retreat from ESG commitments may face shareholder criticism, activist pressure, or claims alleging inadequate oversight of financially material climate or human capital risks. For D&O purposes, that tension is significant because these disputes increasingly are framed through the language of fiduciary duty, governance integrity, disclosure obligations, and shareholder rights. 

Texas AG’s lawsuit against ISS repeatedly argues that ISS’s ESG-oriented recommendations allegedly conflict with shareholders’ best financial interests. Whether or not those allegations ultimately succeed, the framing itself is important because anti-ESG plaintiffs and regulators increasingly attempt to characterize ESG-related governance practices as evidence of inadequate oversight, improper prioritization of non-financial objectives, or misleading disclosure practices.  Indeed, this framing closely parallels fiduciary duty theories advanced in ESG-backlash ERISA litigation, where plaintiffs similarly allege that ESG considerations conflict with the obligation to maximize financial returns

The Exxon dispute further demonstrates how governance conflicts surrounding ESG increasingly extend into the broader shareholder voting ecosystem itself. Exxon portrays its disagreement with ISS and Glass Lewis not simply as a policy dispute over climate issues, but as a question involving governance integrity, proxy advisor independence, and shareholder accountability. That narrative matters because, as D&O Diary readers may recall, proxy advisors can play an extraordinarily influential role in shaping shareholder voting outcomes involving director elections, executive compensation, climate proposals, governance reforms, and shareholder activism campaigns.

From a D&O underwriting perspective, these developments may significantly complicate governance risk assessments. Underwriters evaluating public company risks increasingly must consider not only a company’s ESG disclosures and sustainability commitments, but also the company’s relationships with activist shareholders, proxy advisors, institutional investors, and stewardship organizations that may influence shareholder voting outcomes and litigation dynamics. Questions involving board independence, proxy voting transparency, shareholder rights, reincorporation efforts, climate oversight, and governance controls increasingly carry political and litigation implications in the current ESG backlash environment that may directly affect D&O exposure.

The Exxon dispute also highlights how politically polarized governance disputes have become. Companies perceived as either too aligned with ESG-oriented governance frameworks or too aggressively opposed to them may face heightened scrutiny from regulators, investors, activist groups, or politically motivated state officials. Companies operating in industries frequently targeted by climate activists or anti-ESG regulators may face elevated securities, derivative, and regulatory exposure regardless of which governance approach they adopt.

The ISS litigation is also noteworthy because it demonstrates that ESG-related exposure is no longer confined to public companies themselves. According to the Texas complaint, ISS and Glass Lewis together control more than 90% of the proxy advisory market. If proxy advisors face increasing legal or political pressure concerning ESG-related recommendations, the effects could ripple throughout the broader governance landscape. Boards may face evolving shareholder expectations, inconsistent voting standards, and greater uncertainty regarding governance best practices. That uncertainty itself may contribute to D&O exposure because governance disputes often arise not because boards ignored risks entirely, but because stakeholders disagree regarding which governance approach was appropriate under evolving standards and expectations. 

The Texas lawsuit against ISS demonstrates that ESG-related D&O exposure is not disappearing even as portions of the ESG movement encounter political resistance. Instead, the litigation theories continue to evolve. ESG disputes increasingly are being reframed through the language of fiduciary duty, governance integrity, shareholder rights, and disclosure accuracy. Public companies, institutional investors, proxy advisors, and governance professionals now face litigation risks not only for allegedly overstating ESG commitments, but also for allegedly incorporating ESG considerations into governance decision-making at all.