In this week’s edition of Economy and Society:
- OCC urges California to exempt national banks from climate disclosure laws
- Ninth Circuit rules against California climate disclosure requirements
- Federal judge temporarily blocks Oklahoma proxy adviser law
- Investor groups sue Kentucky over ESG proxy adviser law
- Arizona voters reject anti-DEI constitutional amendment
In Washington, D.C.
OCC urges California to exempt national banks from climate disclosure laws
What’s the story?
The Office of the Comptroller of the Currency (OCC) sent a letter to the California Air Resources Board (CARB) on Oct. 29 urging the agency to exempt federally chartered banks from two state climate disclosure laws. The OCC argued that applying the laws to national banks and federal savings associations would conflict with OCC regulation and bank safety and soundness, impose compliance burdens, and raise constitutional concerns.
The two laws, enacted in 2023, establish different reporting requirements:
- SB 253 requires U.S.-based companies doing business in California with annual revenues exceeding $1 billion to disclose greenhouse gas emissions, including emissions from their operations, purchased energy, and value chains.
- SB 261 requires companies doing business in California with annual revenues exceeding $500 million to publish biennial reports on climate-related financial risks and measures taken to address them.
CARB's initial regulations implementing SB 253 took effect on Oct. 12 and established a Nov. 10 deadline for the first greenhouse gas emissions reports. Enforcement of SB 261 remains paused amid ongoing litigation.
The OCC argued that the reporting requirements could force banks to collect sensitive information from customers, increase compliance costs, and discourage smaller banks from operating in California. The agency also said that the laws could interfere with federally chartered banks' powers under federal law.
Comptroller of the Currency Jonathan Gould wrote that “the disclosure laws run directly counter to the OCC’s regulation and supervision of federally chartered banks.”
Why does it matter?
The OCC argued that federal banking laws and the Constitution's Supremacy Clause limit states' authority to impose requirements that significantly interfere with national banks' federally authorized activities.
The OCC also argued that the requirements could reduce competition, increase banking costs, and limit access to financial services in California. These are the agency's stated concerns rather than established effects of the laws.
The letter does not itself exempt banks from California's requirements or invalidate either law. The OCC requested that CARB exempt federally chartered banks or clarify that they are not required to comply with the laws. The agency said it would evaluate CARB's implementation to determine whether further action is necessary.
What’s the background?
California Governor Gavin Newsom (D) signed SB 253 and SB 261 in October 2023 as part of the state's efforts to expand corporate climate-related disclosures. CARB is responsible for implementing both laws.
The OCC oversees approximately 1,000 federally chartered banks, which collectively hold about two-thirds of U.S. banking assets. Gould argued that federal preemption and the OCC's exclusive visitorial authority, which generally gives the agency sole authority to examine federally chartered banks and require supervisory information from them, protect banks against conflicting state oversight requirements.
Read more about the ongoing litigation over California's climate disclosure laws below.
In the states
Ninth Circuit rules against California climate disclosure requirements
What’s the story?
On Nov. 9, the U.S. Court of Appeals for the Ninth Circuit ruled that portions of California's corporate climate disclosure laws likely violate the First Amendment, reversing in part a lower court's denial of a preliminary injunction business groups had sought.
The appeals court upheld the district court's refusal to block Scope 1 and Scope 2 emissions reporting under SB 253 but reversed its decision concerning Scope 3 emissions disclosures and climate-related financial risk reporting under SB 261.
The three-judge panel found that Scope 1 and Scope 2 disclosures constitute commercial speech and satisfy intermediate scrutiny under the First Amendment. It determined that Scope 3 disclosures and SB 261 compel noncommercial speech, making them subject to strict scrutiny, which the requirements failed to satisfy.
The ruling was issued one day before California's Nov. 10 deadline for initial Scope 1 and Scope 2 emissions reports, which remains in effect.
Why does it matter?
The decision distinguishes between emissions disclosures tied to a company's own operations and broader reporting requirements involving its supply chain and assessments of future climate-related financial risks. The court found that the latter requirements likely violate the First Amendment, potentially limiting California's ability to mandate those disclosures.
The case now returns to the district court to determine whether SB 253's Scope 3 provisions can be separated from the rest of the law. The appellate ruling does not constitute a final judgment on the constitutional challenge, but its findings support preliminary injunctive relief against Scope 3 reporting and SB 261.
What’s the background?
Several business associations, including the U.S. Chamber of Commerce, challenged the laws on First Amendment grounds. A U.S. district court denied their request for a preliminary injunction, finding that the reporting requirements were unlikely to violate the Constitution.
The Ninth Circuit temporarily blocked enforcement of SB 261 in November 2025 while the appeal was pending but declined to block SB 253 at that time.
Read more about the requirements of SB 253 and SB 261, and the OCC's objections to them, above.
Federal judge temporarily blocks Oklahoma proxy adviser law
What’s the story?
U.S. District Judge Patrick Wyrick of the District Court for the Western Oklahoma temporarily blocked Oklahoma from enforcing its Proxy Advisor Transparency Act against two proxy advisory firms on Oct. 31, finding that the law likely violates the First Amendment.
Governor Kevin Stitt (R) signed House Bill 4429 in May 2026. The law, which was scheduled to take effect Nov. 1, imposes additional disclosure requirements when proxy advisory firms recommend voting against company management.
Institutional Shareholder Services (ISS) and Glass Lewis, which provide voting recommendations to institutional investors, filed separate lawsuits challenging the law. Wyrick issued a preliminary injunction preventing Oklahoma Attorney General Gentner Drummond (R) from enforcing the challenged requirements against the two firms while litigation continues.
Wyrick found that the law treated recommendations opposing company management differently from recommendations supporting management, raising First Amendment concerns.
Wyrick wrote, “The statutory preference is for agreement with management, regardless of the underlying issue.”
The preliminary injunction is not a final ruling on the law's constitutionality.
Why does it matter?
The ruling adds to legal challenges against state laws regulating proxy advisory firms, which advise pension funds and other institutional investors on corporate governance and environmental, social, and governance (ESG) issues.
Federal judges blocked similar requirements in Texas in August 2025 and in Kansas and Indiana in June 2026. The Texas law regulates advice involving ESG and other nonfinancial considerations, while the Kansas and Indiana laws, like Oklahoma's, impose additional requirements on recommendations opposing company management.
In 2026, five states — Tennessee, Oklahoma, Indiana, Kentucky, and Kansas — enacted proxy advisor disclosure laws.
Investor groups sue Kentucky over ESG proxy adviser law
What’s the story?
On Oct. 29, three investor and sustainability organizations filed a federal lawsuit challenging a Kentucky law that regulates proxy advisory firms that consider ESG and other nonfinancial factors when making shareholder voting recommendations.
The Interfaith Center on Corporate Responsibility (ICCR), Ceres, and United Church Funds filed the lawsuit against Kentucky Attorney General Russell Coleman (R) in the U.S. District Court for the Eastern District of Kentucky. The groups allege that Senate Bill 183 violates their First and Fourteenth Amendment rights.
The law requires proxy advisory firms that consider nonfinancial factors when making recommendations to disclose that their advice is not based solely on shareholders' interests.
The lawsuit alleges that the law restricts free speech by imposing requirements based on the content of investment advice and compelling firms to make statements they may disagree with.
ICCR CEO Josh Zinner said in an Oct. 30 statement that “We are deeply concerned that the provisions of SB 183 clearly violate fundamental First Amendment principles.” He continued, “A robust and dynamic economy requires honest competition and the free exchange of ideas, which are directly undermined by this law.”
The plaintiffs are seeking a ruling that the law is unconstitutional and an injunction preventing its enforcement.
What’s the background?
The Kentucky Legislature passed SB 183 in March 2026. Governor Andy Beshear (D) vetoed the legislation on March 27, citing concerns raised by faith-based organizations about First Amendment rights. In his veto message, Beshear wrote, “Senate Bill 183 threatens the constitutional right of faith-based organizations to carry out their investments as they and their members wish to.”
Lawmakers overrode Beshear's veto on March 31, 2026, by votes of 31-6 in the Senate and 76-15 in the House. All Republicans voting supported the override, while all Democrats voting opposed it. The override allowed the legislation to become law without the governor's approval.
Arizona voters reject anti-DEI constitutional amendment
What’s the story?
Arizona voters rejected Proposition 142 59.92% to 40.08% on Nov. 3, 2026. The proposed constitutional amendment would have prohibited certain diversity, equity, and inclusion (DEI) requirements and programs, as well as race-based preferences in public employment, education, and contracting.
The Arizona Legislature referred the amendment to voters through House Concurrent Resolution 2044.
Why does it matter?
The defeat means Arizona will not adopt the proposed constitutional restrictions on DEI-related policies in public institutions. The measure would have expanded the state's existing constitutional prohibition on preferential treatment and discrimination by adding specific restrictions on public education programs, employment requirements, and disciplinary policies.
The measure's proposed restrictions on DEI-related requirements in public contracting make it relevant to ESG legislation. Proposition 142 would have limited certain DEI-related conditions that state and local governments could impose on businesses seeking public contracts. Its defeat leaves Arizona's existing constitutional restrictions on preferential treatment in place without adding those requirements.
Arizona's rejection of Proposition 42 coincided with Democrats winning control of both chambers of the state Legislature for the first time since 1966. With Gov. Katie Hobbs (D) winning re-election Democrats secured a state government trifecta.
Arizona lawmakers can refer constitutional amendments and statutes directly to voters with a simple majority vote in each legislative chamber, without the governor's approval. Republicans previously used this process to bypass Hobbs and place measures on the ballot.