Climate Change

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The Trump Administration has already signaled its intent to take a far different approach with respect to ESG-related issues than the Biden administration. Among other things, the White House has issued orders ordering a dismantling of federal agency DEI initiatives, and the SEC has withdrawn its court defense of its recently issued Climate Change Disclosure guidelines. These actions suggest that other governmental authorities’ climate change-related initiatives – such as those of the EU and of the various U.S. states — could increase in importance, as the U.S. federal government changes its policy direction. However, the EU has recently indicated its intent to step back some of its initiatives. And the Trump Administration has now issued an executive order expressly targeting what it calls “state overreach” with respect to climate change policies.Continue Reading Executive Order Targets State Climate Change-Related Initiatives

In my recent post discussing Trump administration changes affecting the world of D&O, I noted recent developments suggesting that the SEC seems poised to either withdraw or non-enforce the agency’s Climate Change Disclosure Guidelines, which, as discussed here, were finalized in March 2024. However, as I also noted, even if the guidelines are withdrawn, many U.S. companies could still remain subject to ESG reporting requirements under the EU’s Corporate Sustainability Reporting Directive (CSRD).

Now, apparently reflecting a desire among EU member states for their economies to be more competitive in the global business environment, the European Commission has proposed an “Omnibus package” of proposed revisions to streamline a number of EU laws, including the CSRD. As discussed below, the proposed revisions could significantly reduce the number of U.S. companies, and the number of companies overall, obliged to report under the CSRD.Continue Reading Proposed EU ESG Reporting Changes Could Spare Many U.S. Companies

Some of you may have heard: there was a Presidential election in the United States last Tuesday, as a result of which there will be a change in administration next January. This upcoming change almost certainly means a categorical shift in the regulatory environment in Washington, including in particular at the SEC. Many of the SEC’s regulatory initiatives under the Biden administration may be rolled back. In particular, the new administration likely will pull the plug on the SEC’s pending climate change disclosure guidelines. These likely developments at the federal level may mean that, as Cydney Posner noted in a November 7, 2024, post on the Cooley law firm’s PubCo blog (here), State level actions “may, in many ways, take on much larger significance.”

For that reason, it is worth taking a closer look at the ruling last week in the federal court lawsuit in which various business groups led by the U.S. Chamber of Commerce are challenging the California statutes requiring companies “doing business” in the state to make certain climate change-related disclosures. As discussed below, the Court has denied the plaintiffs’ pre-discovery motion for summary judgment on First Amendment grounds. The court’s interesting ruling may provide some indication of the future direction of the litigation, as well as on the likelihood that the California statutes will eventually compel companies to make the mandated disclosures. A copy of the Central District of California’s November 5, 2024, order can be found here.Continue Reading What Now for Climate Change Disclosure Requirements?

On March 6, 2023, a divided SEC, and based on a 3-2 vote, adopted its final climate change disclosure guidelines. The guidelines as adopted are significantly watered down from the draft guidelines originally proposed; for example, the final guidelines do not require  disclosure of so-called Scope 3 greenhouse gas emissions (GGE). As discussed below, the new guidelines will almost certainly face legal challenge. The SEC’s March 6, 2024, press release about the new rules can be found here. The actual rules themselves can be found here. An SEC fact sheet about the new rules can be found here.Continue Reading SEC Adopts Final Climate Change Disclosure Guidelines – What Next?

In my recent wrap-up of the top D&O stories of 2023, I noted that one of the key developments during the past year was California’s adoption of new climate change disclosure requirements, which were enacted at a time when there was the added prospect that the SEC would finally release its own climate change disclosure guidelines by April 2024. While the California requirements have not yet been implemented and the final SEC disclosure guidelines have not yet even been released, there are growing signs that these climate change-related disclosure requirements may face significant hurdles and challenges.

It is not news that the SEC disclosure guidelines, whenever they are finally released, likely will face significant legal challenges, as I have previously noted on this site (here). However, this past week, in a Congressional hearing before a House Financial Services subcommittee, as reported in a January 18, 2024, Law360 article (here), spokespersons for conservative and business interests reiterated their belief that the SEC’s climate change disclosure guidelines, as proposed, reflect “several deficiencies,” and likely will face significant legal challenges.Continue Reading Climate Change Disclosure Requirements Face Hurdles and Challenges

Ever since March 2022, when the SEC released its proposed climate change disclosure guidelines, observers and commentators have watching and waiting to see when the agency would release its final disclosure rules. But in the meantime, important developments elsewhere may mean that many companies may face climate change-related disclosure requirements regardless of the shape the SEC’s final guidelines take. As I noted (here), in July, the European Union adopted its first set of sustainability reporting standards, which will have extensive impact both within and outside the EU. Now, the California legislature has adopted two far-reaching climate-related disclosure bills, which could affect thousands of companies – both public and private, and both within and outside California – and that together could, as the Wall Street Journal put it, represent “among the biggest changes in corporate disclosure in decades.”Continue Reading California Enacts Far-Reaching Climate-Related Disclosure Requirements

In what it calls the “world’s first” of its type, the environmental advocacy group ClientEarth has filed a shareholder derivative action against the board of Shell plc, claiming that the company’s directors have failed to take sufficient steps to protect the company from the future impacts of climate change. The action seeks to compel the board to “strengthen its climate transition plans, in the best interests of the company in the long term.” A copy of ClientEarth’s February 9, 2023 press release about the new lawsuit can be found here. The group’s statement of FAQ’s can be found here.Continue Reading Advocacy Group Sues Shell’s Board for Insufficient Climate Change Action

As I discussed at the time (here), in March 2022, the SEC published proposed climate-related disclosure guidelines. The agency’s proposal is now in the public comment period, and it remains to be seen in what form the guidelines will be put into effect. However, it seems probable that that the guidelines will be implemented in some form, despite concerns expressed in public comments so far. If the rules are put into effect in some form close to the initial proposal, there will be a risk that claimants may seek to rely on the guidelines in connection with future corporate and securities lawsuits. A detailed and interesting September 12, 2022 memo from the Cleary Gottlieb law firm (here) discussed the possibility that the climate change disclosure guidelines could give rise to a host of potential future litigation risks. (Hat tip to the TheCorporateCounsel.net blog for the link to the law firm memo.)
Continue Reading Will Corporate and Securities Litigation Follow SEC Adoption of Climate Disclosure Guidelines?

I was struck by the recent statements of Chubb CEO Evan Greenberg quoted an insurance industry publication that a colleague circulated to me last week. In the article, Greenberg said that when it comes to ESG commitments, many companies – particularly insurance companies – may be over-promising. What made Greenberg’s remarks particularly interesting to me was his suggestion that companies’ commitment to net-zero goals and other lofty-sounding climate aspirations could lead to shareholder lawsuits. It is worth thinking about this litigation possibility in the context of current regulatory action focused on so-called “greenwashing” in the investment fund industry. In both cases, the concern is that companies may tried to take on an ESG aura that the actual facts may not support.
Continue Reading Will Companies’ ESG Goals Lead to Shareholder Litigation?

On March 21, 2022, the SEC, by a 3-1 vote along party lines, approved the issuance of proposed rule changes that, if adopted, would require all registered companies, including foreign issuers, to make specified disclosures related to climate change and greenhouse gas emissions in their registration statements and in annual SEC filings (such as reports on Form 10-K). As discussed below, the proposed disclosure requirements have already provoked significant commentary. The SEC’s 534-page proposed rule release can be found here. The SEC’s fact sheet about the proposed rules can be found here. The SEC’s March 21, 2022 press release about the proposed rules can be found here.
Continue Reading Thinking About the SEC’s Proposed Climate Change Disclosure Requirements