In this week’s edition of Economy and Society:
- Trump issues executive order opposing state ESG policies
- German government repeals ESG law
- New York agency proposes mandatory greenhouse gas reporting
- Florida AG ends contracts with ESG and DEI-connected law firms
- Strive opposes ESG-based executive pay
In Washington, D.C., and around the world
Trump issues executive order opposing state ESG policies
What’s the story?
President Donald Trump (R) issued an executive order last week directing U.S. Attorney General Pam Bondi to investigate and block enforcement of state laws promoting ESG policies. Trump argued such laws conflict with national security and economic interests.
Why does it matter?
The order lays the groundwork for federal legal challenges against state ESG laws. It reverses the dynamic under the Biden administration in which Republican-led states filed legal challenges against federal ESG policies.
Read more
According to ESG Dive:
Trump’s order, titled “Protecting American energy from state overreach,” says that states have enacted or are enacting “burdensome and ideologically motivated ‘climate change’ or energy policies that threaten American energy dominance and our economic and national security.” The order lists New York and Vermont’s climate liability laws, as well as California’s carbon “cap and trade” policy and state climate suits as impediments to U.S. energy producers.
Trump said such state laws are “illegitimate impediments” to domestic energy expansion, specifically for “oil, natural gas, coal, hydropower, geothermal, biofuel, critical mineral and nuclear energy resources.”
“These state laws and policies weaken our national security and devastate Americans by driving up energy costs for families coast-to-coast, despite some of these families not living or voting in States with these crippling policies,” the order said. “These laws and policies also undermine federalism by projecting the regulatory preferences of a few states into all states.”
German government repeals ESG law
What’s the story?
Germany’s new coalition government last week repealed the country’s Supply Chain Act (LkSG), which required companies to monitor their supply chains for potential social and environmental harm.
Why does it matter?
German companies will fall under the EU’s Corporate Sustainability Due Diligence Directive (CSDDD), which is still under revision. The change extends compliance timelines and may reduce due diligence requirements compared to the former German law.
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According to ESG Today:
Introduced in 2021, and applying from 2023, the LkSG created a series of sustainability-focused requirements for large Germany-based companies to prevent and mitigate risks of human rights violations and environmental damage in their operations and supply chains.
The law included requirements for companies to perform human rights and environmental risk analysis annually covering their operations and direct suppliers, and for indirect suppliers if there is knowledge of human rights abuses. The LkSG initially applied to companies with more than 3,000 employees, and from 2024 to companies with more than 1,000 employees. Penalties under the LkSG in the event of violations could reach as high as 2% of annual revenue.
Under a section focusing on bureaucracy reduction, in their new agreement, the coalition said that the “reporting requirement under the LkSG will be immediately abolished and completely eliminated,” adding that existing obligations will not be sanctioned until the CSDDD comes into effect, other than for cases of serious human rights violations.
In the states
New York agency proposes mandatory greenhouse gas reporting
What’s the story?
New York’s Department of Environmental Conservation (DEC) proposed a draft regulation requiring high-emission businesses—including energy production and waste management companies—to report greenhouse gas emissions starting in 2027.
Why does it matter?
DEC Acting Director Amanda Lefton said the regulations would “fill the data gaps left behind by proposed federal rollbacks.” The move is part of a broader trend of Democratic states and cities supporting ESG policies despite federal opposition.
Read more
According to ESG Today:
While noting that the new proposal “does not impose requirements for facilities to reduce GHG pollution or to obtain emission allowances,” it forms part of the DEC’s mandate from Governor Kathy Hochul to advance a mandatory GHG reporting program as part of a new planned cap-and-invest system requiring large emitters to purchase allowances to cover their emissions beyond an allowed and declining cap.
Initially unveiled by Hochul in 2023, the cap-and-invest program would require large greenhouse gas emitters and fuel distributors in New York to pay more than $1 billion per year to purchase allowances for the emissions associated with their activities, based on an economy-wide emissions cap, which would be reduced every year, on a trajectory aligned with the state’s Climate Act, with proceeds used to fund emissions reduction initiatives and support vulnerable communities facing rising energy prices. …
Under the new proposals, entities required to begin reporting annually on GHG emissions would include electric power entities, owners and operators of electricity generation, stationary combustion, landfills, waste-to-energy, natural gas compressor stations, and other infrastructure facilities in the state that emit over 10,000 metric tons of CO2e annually, as well as fuel suppliers, waste haulers, fertilizer and agricultural lime suppliers, and anaerobic digesters and liquid storage of waste facilities that meet certain thresholds.
Florida AG ends contracts with ESG and DEI-connected law firms
What’s the story?
Florida Attorney General James Uthmeier (R) issued a memo last week saying his office will no longer contract with outside law firms involved in ESG or DEI initiatives, which he argued are discriminatory and biased.
Why does it matter?
The move reinforces Florida’s broader opposition to ESG and DEI principles. It also mirrors recent federal efforts to oppose such practices at law firms.
Read more
According to National Review Online:
“The Florida Attorney General’s Office will no longer engage or approve the engagement of private law firms who have or continue to engage in illegal and inappropriate discrimination and bias. Racial discrimination, in any form, is wrong and illegal. Florida taxpayer resources should not redound to the benefit of law firms who pretend otherwise,” Uthmeier said in a memo laying out the new policy.
Uthmeier’s office is going to review its relationships with outside law firms to ensure it is no longer engaging with firms that do not comply. Florida’s Attorney General occasionally works with private attorneys and grants approval when state agencies do so.
“If we are truly committed to the rule of law, then we must be truly committed to equal justice under law. DEI and ESG practices flout these bedrock principles,” Uthmeier said in a statement provided to NR.
On Wall Street and in the private sector
Strive opposes ESG-based executive pay
What’s the story?
Matt Cole, CEO of Strive—an asset management firm critical of ESG investing—said in an interview last week that the company will continue encouraging businesses to separate executive compensation from sustainability and diversity targets.
Why does it matter?
Strive’s campaign challenges the common practice of linking executive pay to ESG goals.
What’s the background?
Strive’s director of corporate governance said less than a year ago that most corporations tie executive pay to ESG metrics. The asset manager has since focused on opposing these policies. Entrepreneur and former Republican presidential candidate Vivek Ramaswamy founded Strive in 2022.
Read more
According to Bloomberg:
Strive, which has assets under management of more than $1.9 billion and saw a jump in inflows in the months after the November US election, regards the issue as a major future area of focus, Chief Executive Officer Matt Cole said in an interview.
“Whenever we see companies that are tying executive compensation to ESG or DEI, that’s going to be a continual focal point,” Cole said. A report published in December found that more than three-quarters of S&P 500 companies link pay for senior executives to environmental, social and governance metrics.
Strive, co-founded by Vivek Ramaswamy in 2022, has urged companies to focus on “value maximization” and to remove ESG or diversity considerations that it argues can act as a distraction to that objective. Ramaswamy is a former US presidential candidate who briefly worked with Elon Musk on the Trump administration’s government-efficiency effort. He’s now running for governor in his home state of Ohio.