Practice News:
- Emily Holland, Sustainability and ESG Counsel, ranked by Chambers Global for Business and Human Rights Law for the fifth year in a row.
- Leah Malone, Head of Sustainability and ESG Practice, together with Simpson Thacher partners Martin Bell and Linton Mann III, published a client memo, “Implications of President Trump’s Early Executive Orders on DEI.”
- Leah Malone, together with Partners Martin Bell, Linton Mann III and Laura Lin, hosted a webinar, “DEI Insights and Practical Guidance Following Recent Executive Orders,” on February 4. For more information and to view the recording, click here.
- Leah Malone and Partner Karen Hsu Kelly spoke at Cornell Tech event, “Proxy Season Preview: Insights for a Successful Season,” on January 30. For additional information and to view the recording, see here.
- Leah Malone spoke at a PLI program, “ESG Considerations for Asset Managers – The Emerging Regulatory Framework Applying to Investment Funds and Investment Advisers 2025” on February 10. For more information and to watch the recording, see here.
- Leah Malone and Partner Erica Rozow and Senior Counsel George Gerstein’s article, “Texas District Court Finds ESG Elements of American Airlines’ 401(k) Plans Violate ERISA Fiduciary Duties,”published by The Corporate Governance Advisor.
Upcoming Events:
Americas
Trump Targets Diversity, Equity & Inclusion in Executive Orders
In the first days of Trump’s presidency, he signed two executive orders targeting DEI policies, programs and initiatives both in the federal government and in the private sector. Executive Order 14151, Ending Radical and Wasteful Government DEI Programs and Preferencing, orders the termination of all federal DEI and DEIA mandates and calls on federal employees to report known attempts to disguise DEI programs. President Trump’s Executive Order 14173, Ending Illegal Discrimination and Restoring Merit-Based Opportunity, orders federal agencies to terminate their own DEI initiatives and combat those in the private sector. Supplementing President Trump’s Executive Orders, on January 21, Charles Ezell, Acting Director of the U.S Office of Personnel Management issued initial guidance regarding Trump’s DEIA Executive Orders. Further, on February 5, U.S. Attorney General Pam Bondi issued an internal memo in alignment with EO 14173, announcing that the Department’s Civil Rights Division will “investigate, eliminate, and penalize” “illegal” DEI and DEIA policies, programs and other initiatives in the private sector, and in educational institutions that receive federal funds. For more information on President Trump’s DEI-related Executive Orders and their impacts, see our client memo and DEI webinar.
SEC Issues New Guidance on Shareholder Proposals
On February 12, the SEC’s Division of Corporate Finance issued Staff Legal Bulletin (SLB) No. 14M providing new guidance for the exclusion of shareholder proposals under Rule 14a-8 of the Securities Exchange Act of 1934. The guidance rescinds Staff Legal Bulletin No. 14L, released in November 2021, which had led to a decrease in no-action relief available for exclusions of proposals relating to environmental and social topics. According to SLB 14M, the SEC will adopt a “company-specific approach in evaluating policy significance, rather than focusing solely on whether a proposal raises a policy issue with broad societal impact or whether particular issues or categories of issues are universally significant.” The change is likely to increase issuers’ ability to exclude proposals relating to certain environmental or social topics. Hours after the release, SEC Commissioner Caroline A. Crenshaw issued a statement expressing disdain for SLB 14M stating that it “moves the goalposts smack dab in the middle of this year’s shareholder proposal process” and that current leadership “rushed out staff guidance for the sake of political expediency.”
SEC Prepares to Adjust Stance on SEC Climate Rules
On February 11, Acting Chairman Mark T. Uyeda issued a statement directing the agency to notify the Eighth Circuit, which is currently hearing the consolidated challenge to the SEC’s climate disclosure rules, of “changed circumstances” and requesting that the Court not schedule the case for argument at this time. The SEC, which adopted the rules in March 2024, voluntarily stayed their effective date in April 2024 pending completion of the litigation, previously saying it would “continue vigorously defending the [rules’] validity.” Uyeda’s statement describes the rules as “deeply flawed” and having the potential to “inflict significant harm on the capital markets and our economy,” and reiterates his belief that the SEC is “without statutory authority or expertise” with respect to climate change issues. The SEC’s letter filed with the Eighth Circuit asks that the Commission be allowed additional time to determine appropriate next steps.
State Financial Officers Seek SEC and DOL Rulemaking on ESG Investing
On January 28, 22 Republican state financial officer members of the State Financial Officers Foundation (SFOF) signed a letter to the Acting Chairman of the SEC and Acting Secretary of the Department of Labor asking the SEC and DOL to (i) issue guidance reaffirming that ERISA plan fiduciaries must discharge their duties solely in the financial interests of plan beneficiaries; (ii) initiate rulemaking to codify this obligation and prohibit the use of plan assets for any political or social “agendas” and (iii) increase enforcement and oversight of activities including proxy voting. The letter references the Northern District of Texas’ ruling in Spence v. American Airlines, which addressed a third-party investment manager’s proxy voting practices and shareholder engagement on ESG factors. For more information on the American Airlines ruling, see our previous client memo.
State AGs Threaten Six U.S. Financial Institutions Over ESG-related Practices
On January 23, 10 Republican state attorneys general, led by Texas, sent letters to six U.S. financial institutions, accusing them of violating various federal and state laws and their fiduciary duties by advancing “discriminatory” employment, board and supplier quotas and pursuing membership in net-zero focused multistakeholder initiatives. The letter seeks responses to information requests regarding DEI targets, net-zero commitments and related engagement within 45 days, in order to avoid enforcement action. The letter follows President Trump’s Executive Order, “Ending Illegal Discrimination and Restoring Merit-Based Opportunity,” which, among other things, directs executive agencies to identify up to nine companies to investigate for DEI-related actions, which the Trump administration deems “illegal discrimination.” For more information on President Trump’s DEI-related Executive Orders and their impacts, see our client memo.
NY Climate Disclosure Bills Reintroduced
In late January, New York state senators Hoylman-Sigal and Sanders introduced greenhouse gas (GHG) emissions and climate-related financial risk disclosure bills similar to SB253 and SB261 in effect in California (see our latest alert here). The New York bills, SB S3456, and SB S3697, which are similar to prior versions introduced during the state’s 2024 legislative session, would apply to entities meeting size and connection to the state criteria. For additional information on enacted pro- and anti-ESG legislation in U.S. states, see our monthly Battlegrounds update.
Federal Reserve Exits Climate-focused Central Bank Coalition
On January 17, the Federal Reserve Board announced that it had withdrawn from the Network of Central Banks and Supervisors for Greening the Financial System (NGFS), a global coalition of over 100 central banks and prudential supervisory authorities focused on mobilizing green finance and providing recommendations for climate-risk management in the finance sector. The governing body attributed its exit to the NGFS’s broadening scope that is outside of the Board’s statutory mandate. The Federal Deposit Insurance Corporation also withdrew from NGFS following the Board’s exit.
NZAM Suspends Activities for Review Following a Major Company Exit
On January 13, the Net Zero Asset Managers (NZAM) initiative suspended its signatory implementation and reporting activities to undergo a review following the exit of a global investment management company in early January. NZAM describes the suspension as seeking to ensure it “remains fit for purpose in the new global context” and in response to “recent developments in the U.S. and different regulatory and client expectations in investors’ respective jurisdictions.” NZAM removed its commitment statement, list of NZAM signatories and targets and related case studies from its public website, pending the review’s outcome.
EU/U.K.
EU Omnibus Simplification Package on EU Taxonomy, CSRD and CSDDD Nears Publication
The EU’s Omnibus Simplification Packages, which include an effort to modify three key pieces of EU sustainability reporting legislation: the EU Taxonomy, the Corporate Sustainability Reporting Directive (CSRD) and the Corporate Sustainability Due Diligence Directive (CSDDD), are due to be published on February 26, though media reports indicate the date could be pushed. Industry and NGO stakeholder feedback has been solicited, including via a closed door roundtable held on February 6. The EU Commission is expected to re-open the core text of CSRD and CSDDD through the Simplification Package, which could mean substantial changes to the scope, timeline and substantive requirements of the directives.
EU Carbon Border Adjustment Mechanisms Faces Potential Streamlining
The EU’s Competitiveness Compass, released January 29, indicated that changes to the EU’s Carbon Border Adjustment Mechanism (CBAM) may be incoming. CBAM is an EU regulation which taxes particular products (currently, iron and steel, aluminum, cement, fertilizer, electricity and hydrogen, subject to expansion) from non-EU countries in cases where the same products are also produced in the EU. The Compass indicates that CBAM is due for review this year, and that the EU Commission is preparing a CBAM simplification “for smaller market players.” On February 6, Climate Commissioner Wopke Hoekstra indicated in an interview with the Financial Times that he wants to exempt more than 80% of EU companies currently in scope of CBAM. CBAM is currently slated to end its transitional period and begin full scope enforcement on January 1, 2026.
Platform EU Commission Publishes EU Competitive Compass
On January 29, the European Commission published a Competitive Compass, setting the approach and selection of key measures to drive the EU Commission’s work for the next five years and boost the bloc’s competitiveness. The Compass identifies three core areas for action (innovation, decarbonization, and security) underpinned by five cross-cutting activities, including simplification and reduction of regulatory and administrative burdens by at least 25% for all companies and by at least 35% for SMEs. The Commission aims to achieve these targets through a series of Simplification Omnibus packages (one of which is described above).
EU Platform on Sustainable Finance Publishes Report on Transition Plans
On January 23, the EU Platform on Sustainable Finance (PSF), an advisory body to the EU Commission, published a report advising on the development and implementation of corporate transition plans aligned with the EU’s net zero by 2050 target and other environmental objectives, in line with the Paris Agreement. The report follows the EU Commission’s non-binding recommendations regarding how non-financial and financial companies can voluntarily use EU sustainable finance tools to generate, raise and attract transition finance and provides recommendations to the EU Commission on targeted policy interventions to facilitate transition finance. The recommendations address four core elements for the development and implementation of corporate transition plans, in line with EU requirements including CSRD and CSDDD: (i) science-based and time-bound targets; (ii) key actions to achieve targets; (iii) financial planning and (iv) governance of oversight of plans and implementation.
EU PSF Publishes Draft Report on Simplifying the EU Taxonomy
On January 8, the EU PSF published a draft report on preliminary recommendations for the review of the Climate Delegated Act (which was adopted in 2021), including recommendations of new economic activities to be added to the EU Taxonomy Regulation. Recommendations include: (i) improvement to the technical screening criteria for climate change adaptation and climate change mitigation and adaptation, including through harmonizing activity titles and descriptions of relevant criteria, (ii) simplifying the criteria for the “substantial contribution” and “Do No Significant Harm” (DNSH) assessment and (iii) mapping activities that are inconsistent or insufficient to consider the DNSH criteria to expand the scope and usability of EU Taxonomy.
New Regulation on Packaging and Packaging Waste Published in the EU’s Official Journal
On January 22, Regulation (EU) 2025/40 of the European Parliament and of the Council of 19 December 2024 on packaging and packaging waste (PPWR) was published in the Official Journal of the EU and entered into force on February 11. PPWR forms an integral part of the European Green Deal and the EU Circular Economy Action Plan and governs the full life cycle of packaging, including obligations ranging from packaging design to recyclability and reuse. PPWR sets out progressive targets for reducing packaging waste and requires EU Member States to achieve a 5% reduction by 2030 (from a 2018 base line), a 10% reduction by 2035 and a 15% reduction by 2040, and will apply across all product sectors and to all types of packaging placed on the EU market. PPWR will apply on a phased in basis from August 12, 2026.
ECHR Rules Italy’s Inaction on Illegal Dumping of Waste Violates the Right to Life
On January 30, in the case of Cannavacciuolo and Others v. Italy (application nos. 51567/14 and three others), the European Court of Human Rights (ECHR) unanimously found that the prolonged inactivity by Italy in relation to the dumping, burying or burning waste on private land resulted in a violation of Article 2 (Right to Life) of the European Convention on Human Rights. The ECHR found that Italy had been aware of the problems with illegal dumping and burying of waste in illegal areas, including in quarries, waterways or large pits on agricultural land since 1988, but had failed to address the situation with the required diligence. The ECHR mandated Italy draw up a comprehensive strategy to address the situation and establish monitoring mechanisms to avoid any future occurrences.
AMEA
Three Major Stock Exchanges in China Release Sustainability Reporting Guidance
On January 17, the Shanghai Stock Exchange, the Shenzhen Stock Exchange and the Beijing Stock Exchange–released voluntary guidance for listed companies on the preparation of sustainability reports. The guidance aims to help listed companies develop sustainability governance frameworks and management procedures and improve the quality of reports. The guidelines are available here in Chinese for the Shanghai Stock Exchange, the Shenzhen Stock Exchange, and the Beijing Stock Exchange.
Australia’s AUASB Adopts Sustainability Assurance Standards
On January 28, Australia’s Auditing and Assurance Standards Board (AUASB) approved the adoption of international standard ISSA 5000 General Requirements for Sustainability Assurance Engagements in Australia, which will apply to sustainability assurance engagements from reporting periods beginning January 1, 2025. AUASB’s adoption of ISSA 5000 aims to foster greater international consistency in climate and sustainability reporting as well as strengthen public confidence in the annual report disclosures of Australia’s largest companies. The ISSA 5000 standard prioritizes improving specificity with respect to (i) the difference between limited and reasonable assurance; (ii) the scope of the assurance engagement; (iii) the suitability of reporting criteria; (iv) what comprises sufficient appropriate evidence; (v) materiality in the context of the assurance engagement; and (vi) an entity’s process to identify sustainability information. The AUASB also approved ASSA 5010, Timeline for Audits and Reviews of Information in Sustainability Reports under the Corporations Act 2001, which phases in limited and reasonable assurance for mandatory climate reporting in Australia.