In this week’s edition of Economy and Society:
- SEC ends climate-investor investigation, warns of disclosure obligations
- Democratic state officials urge SEC to retain shareholder proposal rule
- Oklahoma defends proxy advisor law in federal court
- HSBC ties European business loan pricing to ESG ratings
- Deloitte survey finds companies increasing sustainability investments
In Washington, D.C.
SEC ends climate-investor investigation, warns of disclosure obligations
What’s the story?
The Securities and Exchange Commission (SEC) released a report on Oct. 7 about their investigation into whether large asset managers complied with federal disclosure requirements during a 2021 campaign to elect new directors to ExxonMobil’s board. The agency said it would not pursue enforcement action but outlined circumstances in which coordinated shareholder activities could trigger additional disclosure requirements.
The investigation examined the activities of Climate Action 100+, an investor initiative focused on corporate climate policies, and its members during a 2021 campaign in which hedge fund Engine No. 1 sought to replace four ExxonMobil directors to influence the company's strategy on fossil fuels and the energy transition. The SEC investigated whether Climate Action 100+ members' participation in the initiative and support for the campaign amounted to coordinated shareholder activity that would require them to disclose their combined holdings and potentially affect their eligibility to use simplified ownership reporting forms.
The report discussed BlackRock and State Street, which belonged to Climate Action 100+ during the campaign, and Vanguard, which did not. The SEC made no findings of securities law violations and decided not to pursue enforcement action.
Why does it matter?
Federal securities law generally requires investors who own more than 5% of a company’s shares to disclose their holdings to the SEC. Investors who do not seek to influence corporate control may qualify to use Schedule 13G, a shorter disclosure form, rather than the more detailed Schedule 13D.
The SEC said that investors participating in efforts to influence corporate control, including through organizations like Climate Action 100+, could lose their eligibility to use Schedule 13G. It also said that investors acting together could be considered a group under federal securities law, potentially triggering additional disclosure requirements if their combined holdings exceed 5%.
In its report, the SEC stated that “What places eligibility at risk is not the exchange of views, but the shift into coordinated conduct that departs from ordinary-course practices.”
The SEC said these considerations apply beyond Climate Action 100+ to other investor organizations that coordinate shareholder activities.
What’s the background?
Climate Action 100+ launched in 2017 as an investor initiative focused on encouraging companies to address climate-related financial risks, reduce emissions, and improve climate disclosures. BlackRock joined the initiative in January 2020, and State Street joined in November 2020. Vanguard did not join because it said joining could compromise its independence in its shareholder voting decisions.
At ExxonMobil’s May 2021 annual shareholder meeting, activist hedge fund Engine No. 1 sought to replace four directors, arguing that the company needed additional expertise to address its financial performance and the transition to lower-carbon energy. Shareholders elected three of its candidates, with BlackRock, State Street, and Vanguard supporting at least some of the new directors. Climate Action 100+ had encouraged its members to support the campaign.
In February 2024, BlackRock transferred its participation in Climate Action 100+ to its international division, while State Street and JPMorgan Asset Management withdrew from the initiative. The changes followed disagreements over the initiative's expanded expectations for participating investors.
In the states
Democratic state officials urge SEC to retain shareholder proposal rule
Economy and Society previously covered the SEC's decision to stop reviewing shareholder proposal exclusions in August and its initial proposal to rescind Rule 14a-8 in September.
What’s the story?
Three Democratic state financial officers criticized an SEC proposal to eliminate the federal rule governing shareholder proposals during an Oct. 1 press call. Illinois Treasurer Mike Frerichs, Minnesota State Auditor Julie Blaha, and Massachusetts Treasurer Deb Goldberg called on the SEC to retain Rule 14a-8 and extend the proposal’s public comment period.
The SEC proposed eliminating the rule on Sept. 16, which would leave decisions about shareholder proposals to state laws and companies’ governing documents. The agency is accepting public comments through Nov. 20. The officials called for doubling the comment period to give investors more time to evaluate the changes.
Frerichs said eliminating the rule would make it harder for investors to raise concerns with companies, while Goldberg said that eliminating the rule could lead to differing state requirements for shareholder proposals, which could increase costs for public pension funds.
Why does it matter?
Rule 14a-8 establishes a federal process for eligible shareholders to submit proposals for inclusion in companies’ proxy materials, which shareholders use to vote on corporate matters. Investors use the process to raise issues involving corporate governance, environmental policies, and other business practices.
The SEC argues these requirements should be determined under state law rather than federal regulation. The agency also says the current rule has imposed costs and discouraged states from developing their own approaches.
The state officials say eliminating the federal process could limit investors’ ability to raise concerns with companies and increase the costs of shareholder engagement. Frerichs said: “Weakening the federal shareholder proposal process is not going to make the sustainability risks for companies go away. It’s just going to make it harder for shareholders to raise them.”
What’s the background?
The SEC established the federal shareholder proposal process in 1942 and has revised its requirements over time. In August 2026, the agency announced that its staff would stop reviewing company requests to exclude shareholder proposals, a separate change preceding its September proposal to rescind Rule 14a-8.
Oklahoma defends proxy advisor law in federal court
What’s the story?
A U.S. District Court judge heard arguments on Oct. 8 over whether to temporarily block Oklahoma’s Proxy Advisor Transparency Act (HB 4429), which is scheduled to take effect Nov. 1. The law requires proxy advisor firms to disclose whether recommendations against company management rely on written financial analysis and to meet additional disclosure requirements depending on whether such analysis exists.
Proxy advisory firms Glass Lewis and Institutional Shareholder Services (ISS) argue that the law violates their First Amendment rights because it imposes additional disclosure requirements on recommendations opposing company management.
ISS filed its lawsuit in August, and Glass Lewis filed its lawsuit on Sept. 4. At the hearing, Oklahoma officials defended the law as a financial disclosure requirement, while attorneys for the firms argued that it discriminates against recommendations opposing company management.
Bruce Oakley, an attorney for ISS, said, “This law regulates and burdens our speech. It is designed to stifle dissent from company management.”
U.S. District Judge Patrick Wyrick of the U.S. District Court for the Western District of Oklahoma said he would rule on the firms’ requests for preliminary injunctions before the law’s Nov. 1 effective date.
Why does it matter?
The lawsuits raise questions about whether states can require additional financial disclosures from proxy advisory firms based on whether their voting recommendations agree with company management.
Supporters argue that the requirements provide investors with greater transparency about the financial basis for voting recommendations. ISS and Glass Lewis argue that the law discriminates against certain viewpoints and violates their First Amendment rights.
Federal judges have already temporarily blocked similar laws in Texas, Kansas, and Indiana. The Oklahoma ruling could further clarify how courts assess state regulation of proxy advisory firms.
What’s the background?
Oklahoma Gov. Kevin Stitt (R) signed HB 4429 in May 2026. The law is part of a broader wave of state legislation regulating proxy advisory firms and their use of environmental, social, and governance (ESG) considerations.
Tennessee, Oklahoma, Indiana, Kentucky, and Kansas enacted proxy advisor disclosure laws in 2026.
In July 2025, ISS and Glass Lewis sued Texas over SB 2337, which imposed disclosure requirements when proxy voting recommendations relied on certain nonfinancial considerations, including ESG and diversity, equity, and inclusion (DEI) factors. The U.S. District Court for the Western District of Texas later issued a preliminary injunction blocking enforcement of the law against the firms while the litigation continues.
The federal government also increased its scrutiny of proxy advisors later that year. In December 2025, President Donald Trump (R) issued an executive order directing the Securities and Exchange Commission (SEC) to review rules governing proxy advisors, including their considerations of ESG and DEI factors.
On June 24, 2026, U.S. District Judge Holly L. Teeter of the U.S. District Court for the District of Kansas — a Trump appointee — issued preliminary injunctions preventing Kansas from enforcing the Proxy Advisory Transparency Act (SB 375) against ISS and Glass Lewis while the litigation proceeds. Judge Teeter concluded the firms were likely to succeed on their claims that the law regulates speech based on viewpoint and therefore likely violates the First Amendment.
On June 26, U.S. District Judge Matthew Brookman of the U.S. District Court for the Southern District of Indiana — a Biden appointee — granted preliminary injunctions preventing Indiana from enforcing HB 1273 against ISS and Glass Lewis pending a final decision. Judge Brookman likewise concluded the firms were likely to succeed on their First Amendment claims.
ISS and Glass Lewis have also challenged Kentucky’s law in the U.S. District Court for the Eastern District of Kentucky, where the litigation remains pending. The firms continue to litigate a similar challenge to Texas’ 2025 proxy advisor law.
Around the world
HSBC ties European business loan pricing to ESG ratings
What’s the story?
HSBC announced on Oct. 7 that it was expanding its Sustainability Improvement Loan (SIL) program to small and medium-sized businesses in continental Europe. The program links borrowing costs to changes in a company’s environmental, social, and governance (ESG) rating.
Under the program, eligible businesses receive an annual ESG assessment from an approved third-party provider, such as EcoVadis, CDP, or Inrate. Companies whose ratings improve beyond agreed thresholds may qualify for lower interest rates, while those whose ratings decline may face higher rates. Rates may remain unchanged if scores stay within the agreed range.
The loans can be used for general business purposes, and eligibility depends on the type of financing, borrower, and availability of approved ESG rating providers.
Why does it matter?
HSBC designed the program to make sustainability-based financing more accessible to smaller businesses. Unlike traditional sustainability-linked loans, which generally require companies to establish customized performance targets, the SIL program uses existing third-party ESG ratings to determine changes in borrowing costs.
The approach gives businesses a financial incentive to improve their ESG ratings without requiring individually negotiated sustainability targets. HSBC says the simplified structure is intended to reduce the complexity of sustainability-related financing for smaller companies.
What’s the background?
HSBC introduced its Sustainability Improvement Loan program in the United Kingdom in 2024 and subsequently expanded it to Asian and Middle Eastern markets.
In September 2024, HSBC launched the program in Hong Kong and completed its first Asia-Pacific transaction with Opal Cosmetics, a manufacturer of personal care and beauty products. HSBC reported that the program was available in 11 markets by the end of 2024.
In the spotlight
Deloitte survey finds companies increasing sustainability investments
What’s the story?
An October report from the consulting firm Deloitte found that 78% of surveyed executives reported that their companies increased their sustainability investments over the past year, including 18% that increased spending by at least 20%. Only 2% reported reducing their investments.
Deloitte's 2026 C-suite Sustainability Report surveyed more than 2,150 senior executives across 29 countries, representing companies with annual revenues ranging from $500 million to more than $10 billion.
The survey also found that 77% of executives reported higher returns on investment from sustainability initiatives than from other business investments. Respondents cited benefits including cost reductions (78%), increased revenue (79%), and improved risk management and resilience (81%).
Why does it matter?
Although overall spending increased, the average number of sustainability initiatives per company declined from five to 3.4 over the past year. Additionally, 51% of executives identified financial benefits as their top consideration when evaluating sustainability investments, compared with 26% who prioritized sustainability goals or environmental outcomes.
The findings suggest that companies are placing greater emphasis on the financial benefits of sustainability initiatives and becoming more selective about their investments.
Deloitte's global sustainability business leader Jennifer Steinmann said that “The next phase of sustainability leadership is defined by intention and precision. Executives who understand and demonstrate how sustainability supports growth, resilience, and competitive advantage can set themselves up to be better positioned to make investment decisions that create lasting business value.”