California’s Flurry of ESG Lawmaking
Broad new disclosure requirements regarding greenhouse gas emissions and climate risk management, use of voluntary carbon offsets, and the diversity of teams backed by investment funds advance the state’s ESG agenda, but raise questions for 2024 and beyond.
While the first half of 2023 was notable for significant anti-ESG state lawmaking activity in the United States, with one-third of states passing laws seeking to limit the impact of ESG-related considerations, the second half of the year has been characterized by a perceptible shift in the regulatory landscape. In July, the SEC finalized new rulemaking relating to public companies’ disclosure of cybersecurity incidents and related risk management practices, and in September updated the “Names Rule” to specifically require that registered investment funds with names indicating an ESG-related focus align at least 80% of their underlying assets with that investment focus. And now, with four bills signed into law this month requiring new ESG-related disclosure, California has set first-of-their kind requirements in the United States impacting a broad swath of companies that have touchpoints with the state.