In this week’s edition of Economy and Society:
- SEC withdraws proposed ESG rules
- EU legislators seek ESG regulation cuts
- European insurance company leaves global climate organizations
- Texas governor considers bill requiring proxy advisor disclosures
- ESG legislation update
- Study argues asset managers aren’t investing to reduce emissions
In Washington, D.C., and around the world
SEC withdraws proposed ESG rules
What’s the story?
The Securities and Exchange Commission (SEC) withdrew two ESG-related proposed rules last week—one that would have expanded ESG disclosure requirements and another that would have revised the shareholder proposal submission process.
Why does it matter?
The withdrawal adds to a broader rollback of ESG-related initiatives amid growing political opposition, particularly from Republicans. The enhanced disclosure rule—often called the anti-greenwashing rule—was a centerpiece of SEC Chair Gary Gensler’s ESG agenda under the Biden administration but was never finalized.
Read more
According to ESG Dive:
The SEC first proposed the rule to require enhanced disclosures from investment advisers and companies on ESG practices in May 2022, and Congressional Democrats had urged the SEC to finalize its anti-greenwashing rule for ESG funds under the prior administration. The final rule was initially expected in April 2024, pushed to October 2024 and ultimately went unreleased before the change in administration.
The rule would have required investment advisers and companies to make additional disclosures about their ESG strategies and practices in their prospectuses, annual reports and brochures; implemented a comparable disclosure approach for investors to easily compare ESG funds; and required environmentally-focused funds to disclose their portfolio greenhouse gas emissions, according to an agency fact sheet. …
The agency proposed its update to the shareholder proposal and resubmission process in July 2022, which would have replaced a rule from the prior Trump administration’s SEC that raised thresholds for stocks required to submit a proposal to company boards among other changes. A judge in the federal district court for Washington, D.C. recently dismissed a lawsuit from responsible investing groups challenging the Trump administration’s 2020 rule.
EU legislators seek ESG regulation cuts
What’s the story?
EU lawmakers proposed scaling back the Corporate Sustainability Reporting Directive (CSRD) by limiting mandatory emissions reporting to companies with more than 3,000 employees—up from the current threshold of 250 and higher than a previous proposal of 1,000.
Why does it matter?
The proposal reflects ongoing tension within the EU over sustainability reporting requirements. Lawmakers face competing pressure from supporters of the directive and from international opponents of ESG—including the Trump administration.
What’s the background?
The proposal followed a decision in April to delay the implementation of the CSRD requirements. For more information, click here.
Read more
According to Bloomberg:
Europe is working on a major rewrite of its rulebook for ESG (environmental, social and governance) rules affecting reporting, due diligence and climate-transition planning. The development follows pressure from Germany and France, amid concerns that the sheer scale of the bloc’s ESG regulations is hurting European competitiveness.
[Jorgen] Warborn’s recommendations include getting rid of requirements for climate transition plans originally included in the Corporate Sustainability Due Diligence Directive. It’s already clear that the proposal will face opposition from some lawmakers.
Kira Marie Peter-Hansen, a member of parliament in the Greens/EFA group, said in a LinkedIn post that the party will approach talks with the “aim of preserving the goals of the legislation, for the sake of people and our planet.”
European insurance company leaves global climate organizations
What’s the story?
Munich Re, the world’s largest reinsurer (which provides insurance to insurance companies), announced last week that it has withdrawn from several major climate organizations, including:
- the Net Zero Asset Owner Alliance (NZAOA),
- the Net Zero Asset Managers Initiative (NZAM),
- Climate Action 100+ (CA100+), and the
- Institutional Investors Group on Climate Change (IIGCC).
Why does it matter?
Munich Re’s exit continues a broader move away from global climate alliances. U.S. firms began leaving last year over legal and political concerns, and now Canadian and European companies are following suit. Munich Re said “legal and regulatory pressures and climate disclosure complexity” motivated the decision.
Read more
According to ESG Today:
The announcement marks the latest in a series of departures of financial companies from climate coalitions, following years of pressure on participants in the groups from a vocal anti-ESG movement, particularly by Republican politicians in the U.S., which has rapidly picked up pace since the election of Donald Trump in the U.S. Earlier this year, after the exit of BlackRock, NZAM announced that it will suspend its primary activities, as it moves to adapt to a changing political and regulatory environment. A related coalition, the Net-Zero Banking Alliance (NZBA), has seen all major U.S. and Canadian banks depart as well. …
In a statement announcing its new decision, Munich Re said that the move was made amongst “an increasing ambiguity in assessing private initiatives under the legal and regulatory regimes across various jurisdictions.” The firm added that climate-related disclosures and other related administrative requirements have become very complex, and are disproportionate to the impact achieved in terms of climate protection. …
Munich Re’s ambition to reduce GHG emissions from its insurance business and investment portfolio to net zero by 2050 remains on the company’s website, and the company revealed that it has achieved or exceeded its interim 2025 climate targets, which included a goal to reduce GHG emissions related to its investment portfolio by 29% by 2025, on a 2019 basis.
In the states
Texas governor considers bill requiring proxy advisor disclosures
What’s the story?
The Texas legislature passed a bill June 2 requiring proxy advisory firms to disclose when their shareholder vote recommendations at Texas-based companies incorporate ESG or other non-financial considerations.
Why does it matter?
If Gov. Greg Abbott (R) signs the bill, it would become the first law of its kind and give Texas companies new legal recourse when proxy advice includes ESG considerations. The two major proxy firms—ISS and Glass Lewis—and ESG-aligned corporate governance experts have opposed the bill.
Read more
According to Pensions & Investments:
If recommendations do consider what the bill defines as nonfinancial reasons like ESG, diversity, equity or inclusion, a social credit or sustainability factors, proxy advisers would have to prominently disclose this information to clients and on their websites, and notify Texas companies and the state attorney general within 24 hours, among other provisions.
The bill would authorize an “affected party,” such as a shareholder or company receiving proxy advice, to seek a declaratory judgment or injunctive relief. It also allows the Texas attorney general to intervene in such cases after receiving notice. …
A legislative analysis of SB 2337 for the Senate Trade, Workforce & Economic Development Committee said the measure aims to address “conflicts of interest” and “deceptive practices” in the proxy advisory industry. It also raised concerns about proxy firms giving conflicting advice to different clients on the same proposal and offering corporate governance consulting services, which it said creates further conflicts.
ESG legislation update
Two state legislatures took action on three ESG-related bills last week (since June 10). North Carolina enacted one bill, and an Ohio bill passed both chambers and advanced to the governor.
States with legislative activity on ESG last week are highlighted in the map below. Click here to see the details of each bill in the legislation tracker.
In the spotlight
Study argues asset managers aren’t investing to reduce emissions
What’s the story?
A new BloombergNEF analysis argues asset managers continue to invest in energy and industrial companies in ways unlikely to deliver the emissions cuts ESG advocates and environmental groups want.
Why does it matter?
The study says ESG opposition led asset managers to shift strategies and focus on engagement with fossil fuel companies rather than divestment. The analysis argues the investment industry remains essential to cutting emissions, but some ESG critics—including author and analyst Stephen Soukup—say the data suggests investment practices fail to drive climate outcomes.
Read more
According to Bloomberg:
The BNEF analysis, which looked at almost 70,000 investment funds across the globe, found that fund bosses — on average — are still allocating money to energy companies whose capital expenditure favors high-carbon activities.
The results “show that investment products and investors are far away from being aligned to net zero,” BNEF analysts led by Ryan Loughead wrote in a report published on Wednesday. …It’s the latest study to indicate that global decarbonization efforts are faltering, amid rising costs, political opposition and logistical bottlenecks. It also underlines the critical role the finance sector plays in enabling the transition to a low-carbon world.