Key Topics
- Federal Judge Blocks Texas Bill Targeting ESG and DEI Practices at Proxy Firms
- EPA Proposes Rule to Scale Back Greenhouse Gas Reporting Program
- U.S. Appeals Court Continues Pause on Litigation of SEC Climate-Relate Disclosure Rule
The Details
The U.S. District Court for the Western District of Texas entered a preliminary injunction against Texas Senate Bill 2337 (SB 2337) one day before the bill’s effective date. The bill would have regulated proxy advisory firms on their diversity, equity and inclusion (DEI)- and ESG-related investment recommendations and disclosures.
- The bill, meant to take effect September 1, was intended to limit the use of DEI- and ESG-related considerations at proxy advisory firms by requiring financial analysis supporting its advice and to publicly disclose that such advice does not solely serve shareholders’ financial interests.
- Institutional Shareholder Services (ISS) and Glass Lewis brought separate lawsuits, arguing the law unconstitutionally restricted their speech and interfered with the Employee Retirement Income Security Act (ERISA).
- The court agreed with the proxy firms’ arguments that the bill “discriminates based on viewpoint” and compels firms to adopt the government’s stance on contentious issues.
- Texas Attorney General Ken Paxton has announced that his office will be appealing the preliminary injunction orders. A trial on the merits is currently scheduled to begin in February 2026.
The Environmental Protection Agency (EPA) released a proposed rule that would significantly scale back the Greenhouse Gas Reporting Program (GHGRP) and eliminate reporting requirements for all source categories except Petroleum and Natural Gas Systems (Subpart W).
- The agency maintains that the Clean Air Act does not require collection of greenhouse gas data outside of Subpart W (excluding distribution). EPA will consider separate petitions for reconsideration of Subpart W in a different rulemaking.
- The proposal would relieve approximately 8,200 facilities across various sectors (e.g., cement, power generation, electronics, ferroalloy production and solid waste landfills) of current reporting obligations.
- Comments regarding the proposed rule are due by November 3, 2025.
The U.S. Court of Appeals for the 8th Circuit issued an order on September 12 continuing to hold in abeyance the litigation over the agency’s Biden-era climate-related disclosure rule.
- The order emphasizes that the Securities and Exchange Commission (SEC) must either defend the disclosure rule in court or conduct a rulemaking process to rescind or revise it.
- SEC commissioners voted in March 2025 to cease defending the rule and had asked the court to proceed with clarifying the agency’s rulemaking authority. Akin discussed that development here.
The court rejected SEC’s approach, holding the case in abeyance “to promote judicial economy” until SEC chooses a path forward. Akin will continue monitoring developments
To read the full newsletter for a comprehensive overview of other recent sustainability policy and regulatory developments and their implications, please click here.
