In this week’s edition of Economy and Society:
- SEC moves to eliminate shareholder proposal rule, shift power to states
- Democratic AGs defend climate risks in credit ratings
- 16 Republican attorneys general question Big Four climate commitments
- ESG legislation update
- Australia proposes reducing climate reporting requirements
- Deloitte pays $21.5 million in DEI settlement
- Global green bond issuance hits quarterly record
In Washington, D.C.
SEC moves to eliminate shareholder proposal rule, shift power to states
What’s the story?
The Securities and Exchange Commission (SEC) submitted a proposed rule for interagency review on Aug. 28 that would rescind Rule 14a-8, the federal regulation requiring public companies to include qualifying shareholder proposals in their annual proxy statements. The proposal would also amend Rule 14a-4, which governs proxy solicitation materials.
Under the current rule, shareholders who meet minimum ownership thresholds can require companies to put proposals—on topics such as executive pay or climate policy—to a vote at annual meetings. Rescinding the rule would eliminate that federal requirement and shift jurisdiction over shareholder proposal disputes to the states where companies are legally incorporated.
A representative of SEC Chairman Paul Atkins said that Atkins "has highlighted concerns that the SEC's Rule 14a-8 on shareholder proposals exceeds the Commission’s authority and infringes upon state laws. To that end, the Commission is expected to consider a proposal to rescind the rule and return the role of regulating shareholder proposals to the states."
The proposed rule is listed as economically significant and is expected to be published for public comment in October 2026, according to the federal regulatory agenda.
Why does it matter?
Moving jurisdiction over shareholder proposals to the states could create different rules for investors depending on where a company is incorporated. State requirements are not uniform, including how many shares investors must own to bring a matter to a vote. Under a new Texas law, for example, investors could need as much as $1 million in shares to file a resolution, compared with $2,000 under the current SEC rule.
The Interfaith Center on Corporate Responsibility, an investor coalition focused on corporate social responsibility that opposes the SEC's proposal, criticized the potential shift. The group's senior policy adviser, Tim Smith, said, "Across the investor community there will be a response to the questionable legal arguments he (Atkins) is making about the authority of the SEC."
Rule 14a-8 has been the primary federal mechanism through which investors have filed proposals on climate, diversity, and executive compensation matters, making it central to both the shareholder-activism and anti-ESG movements in corporate governance. Support for ESG-related shareholder proposals has declined in recent years even as the rule has remained a flashpoint.
What’s the background?
The SEC's Division of Corporation Finance announced on Aug. 14, 2026, that it would permanently stop issuing no-action letters under Rule 14a-8—nonbinding staff responses on whether a company could exclude a shareholder proposal from its proxy materials. The move made permanent a pause first announced in November 2025 for the 2025-26 proxy season only, and went further by ending review of a narrow exclusion category the SEC had continued handling during that pause. The division said the change would let it focus resources on statutorily required filing reviews.
Atkins said in July 2026 that fears of mass proposal exclusions or a litigation spike had not materialized; a Freshfields count found 66% of known proposals were placed on proxies as of June 15, 2026, up from 59% a year earlier. The Interfaith Center on Corporate Responsibility opposed the change; senior policy advisor Tim Smith said investors would now be "forced to consider other options" when companies exclude proposals unilaterally.
The Interfaith Center and As You Sow sued the SEC in March 2026 over the original pause, arguing it bypassed Administrative Procedure Act rulemaking requirements. That case remains pending.
In the states
Democratic AGs defend climate risks in credit ratings
What’s the story?
In an Aug. 27 letter to the SEC, 20 Democratic attorneys general urged the agency not to investigate S&P Global Ratings, Fitch Ratings, and Moody’s over their consideration of climate and energy-transition risks in credit ratings.
The attorneys general responded to an April letter from 23 Republican attorneys general who questioned whether the three credit rating agencies improperly incorporated environmental, social, and governance (ESG) considerations into ratings for fossil fuel companies and energy-producing states and municipalities.
The Republican attorneys general accused the three agencies of using “flawed methodologies to downgrade, or to threaten to downgrade, states and municipalities with fossil-fuel production revenues,” and alleged the agencies “largely have not reversed the downgrades after highly speculative ESG predictions proved to be wrong.”
The Democratic coalition said the Republican attorneys general based their conclusions “on factual inaccuracies and distortions to support the flawed proposition that ... climate and energy transition risks are no longer valid concerns.”
The Democratic attorneys general also argued that the April letter could pressure the agencies to change how they assess financial risks. They wrote, “The Letter could be read to inappropriately pressure the Ratings Agencies to abandon fact-based ratings methodologies and change their independent ratings.”
Why does it matter?
Credit ratings affect borrowing costs for companies and government entities and influence decisions about where to allocate capital. Lower credit ratings can increase the cost of issuing bonds and reduce investment. The Republican attorneys general said the agencies' downgrades increase borrowing costs for fossil fuel-producing states, reduce economic activity and tax revenues, and lower the value of state pension holdings in energy companies.
The dispute also raises questions about government oversight of credit rating agencies. The Republican attorneys general said they could pursue state enforcement actions, antitrust investigations, SEC referrals, or coordination with the U.S. Department of Justice. The Democratic attorneys general said government pressure to change ratings or methodologies could violate federal protections for ratings agency independence.
What’s the background?
In their April letter, the 23 Republican attorneys general asked Fitch, Moody’s, and S&P to take five corrective actions, including explaining or reversing certain fossil fuel-related downgrades, withdrawing from or disclosing ESG commitments, and addressing potential conflicts involving ESG consulting services. An S&P representative said that they "take these matters very seriously and do not have further comments at this time."
Eight Democratic state financial officials responded in May, saying efforts to restrict consideration of climate and other forward-looking risks could undermine independent credit analysis. The Aug. 27 letter marks a broader response from Democratic attorneys general to the Republican coalition's arguments.
16 Republican attorneys general question Big Four climate commitments
What’s the story?
On Aug. 24, a coalition of 16 Republican state attorneys general sent letters to Deloitte, Ernst & Young (EY), KPMG, and PricewaterhouseCoopers (PwC) — collectively known as the Big Four accounting firms — raising concerns that the firms' climate commitments may conflict with professional accounting standards and state consumer protection laws.
The attorneys general focused on the firms' involvement with three climate initiatives:
- Task Force on Climate-related Financial Disclosures (TCFD): A framework that developed recommendations for companies to disclose climate-related financial risks.
- International Sustainability Standards Board (ISSB): An international standard-setting body that develops sustainability and climate-related financial disclosure standards.
- Net Zero Financial Service Providers Alliance (NZFSPA): A coalition of financial service providers that committed to aligning relevant products and services with achieving net-zero greenhouse gas emissions by 2050 or sooner.
The attorneys general said the commitments could compromise the firms' independence as auditors. They said, "These commitments create an appearance that the Big Four have agreed to compromise their independence in favor of pursuing climate-related goals external to the audit."
The attorneys general also questioned whether the firms could financially benefit from expanded climate-reporting requirements and create conflicts of interest. They wrote, “The Big Four’s climate commitments also create potential conflicts of interest that may violate the duties of integrity and objectivity by imposing climate-related disclosure obligations that benefit the Big Four at the expense of their clients.”
The coalition asked the firms to answer 38 questions and provide documents about their climate commitments, auditing practices, potential conflicts of interest, and government contracts.
Why does it matter?
The letters broaden Republican state officials' scrutiny of ESG practices beyond banks, asset managers, and proxy advisory firms to the accounting industry. They also raise several potential avenues for state action against the Big Four rather than simply criticizing their climate policies.
The attorneys general said the firms' climate commitments raised questions about the firms' government contracts. They wrote, “Violating state and federal contractual terms could result in penalties and termination of the Big Four’s contracts.”
What’s the background?
Republican officials have scrutinized financial institutions' participation in net-zero alliances, arguing in some cases that the commitments can conflict with fiduciary duties or antitrust laws. In recent years, several financial climate groups lost U.S. members, suspended operations, or loosened their commitments.
The Net-Zero Banking Alliance (NZBA) had 140 member banks representing $75.5 trillion in combined assets as of November 2024. After that point, all six major U.S. banks — JPMorgan Chase, Bank of America, Goldman Sachs, Citigroup, Morgan Stanley, and Wells Fargo — withdrew, and the alliance ended operations as a membership organization in October 2025.
The Net Zero Asset Managers Initiative (NZAM), which had more than 300 members managing nearly $60 trillion, suspended operations in January 2025 after BlackRock left. The initiative relaunched in February 2026 with more than 250 signatories and a revised commitment that no longer required members to align their portfolios with a net-zero deadline.
ESG legislation update
The California Legislature passed AB 2599, which would require certain large corporations doing business in the state to disclose whether they or their predecessors profited from slavery. The bill now goes to Gov. Gavin Newsom (D) for consideration.
Around the world
Australia proposes reducing climate reporting requirements
What’s the story?
Australia's Treasury Department launched a consultation Aug. 23 on proposed changes to the country's mandatory climate reporting system intended to reduce compliance costs for companies and businesses in their supply chains.
The proposals include providing clearer limits on the information companies may request from suppliers and other businesses when calculating Scope 3 emissions, which include indirect emissions across a company's value chain. The government is also considering changes to its independent review requirements, including maintaining the current limited assurance standard, delaying a planned transition to the more rigorous reasonable assurance standard until 2035, or applying the higher standard only to Scope 1 and Scope 2 emissions, which cover direct emissions and emissions from purchased energy.
The Treasury said that "reporting practices observed overseas under similar disclosure requirements has highlighted the potential value of clearer boundaries on value-chain information requests.” The government is considering guidance on what companies may reasonably request from suppliers and making more emissions data publicly available to reduce the need for complex data requests from smaller businesses.
The consultation will remain open through Oct. 2.
Why does it matter?
Australia adopted mandatory climate-related financial reporting requirements in 2024, with implementation beginning for the largest companies in 2025 and expanding to additional companies in subsequent years. The requirements include disclosures about climate-related risks and opportunities and greenhouse gas emissions.
The proposed changes would ease parts of that framework as implementation continues, particularly requirements involving Scope 3 emissions and independent assurance. The Treasury said that it is “seeking evidence regarding the costs and benefits of the current assurance settings, including their impact on reporting entities, assurance providers and users of sustainability reports.”
On Wall Street and in the private sector
Deloitte pays $21.5 million in DEI settlement
What’s the story?
Deloitte, a global accounting and consulting firm, agreed to pay $21.5 million to settle U.S. Department of Justice (DOJ) allegations that it discriminated based on race or sex in hiring, promotions, staffing, and employee programs while certifying compliance with anti-discrimination requirements in its federal contracts.
The DOJ announced the settlement Aug. 25 as part of its Civil Rights Fraud Initiative. The department alleged that Deloitte used diversity, equity, and inclusion (DEI) policies that took race or sex into account in hiring, promotion, staffing, compensation, and access to certain employee development programs.
Attorney General Todd Blanche said, “Government contractors cannot reward or penalize employees based on race or sex — and labeling the practice DEI does not make it lawful. The Justice Department will aggressively pursue government contractors that have used taxpayer dollars to fund unlawful discrimination.”
Deloitte denied the government's allegations. The settlement does not constitute an admission of liability by Deloitte, and there has been no determination of liability.
Why does it matter?
The settlement shows how the Trump administration is using the False Claims Act to challenge DEI practices among federal contractors and other recipients of federal funds. The False Claims Act allows the government to recover money from entities that knowingly make false claims involving federal funds.
The DOJ established its Civil Rights Fraud Initiative in May 2025 to use the law against federal funding recipients and contractors that the department says violate civil rights laws while certifying compliance with them. The DOJ memorandum establishing the initiative said, “The False Claims Act is also implicated whenever federal-funding recipients or contractors certify compliance with civil rights laws while knowingly engaging in racist preferences, mandates, policies, programs, and activities, including through diversity, equity, and inclusion (DEI) programs that assign benefits or burdens on race, ethnicity, or national origin.”
The Deloitte case originated with a whistleblower lawsuit filed by the American Alliance for Equal Rights, a nonprofit membership organization that challenges racial and ethnic classifications and preferences. Under the False Claims Act, private parties can bring certain lawsuits on behalf of the federal government and receive part of any recovery. The organization will receive $4.3 million from the federal settlement.
Global green bond issuance hits quarterly record
What’s the story?
According to a Moody’s report released Aug. 31, global green bond issuance reached a record $193 billion in the second quarter of 2026, up 2% from the same period last year.
Green bonds raise money for projects with environmental benefits, such as renewable energy, energy efficiency, or clean transportation.
European issuers drove the increase, with green bond issuance in the region rising 34% from the second quarter of 2025. Europe accounted for nearly two-thirds of global green bond issuance during the quarter. Issuance fell 42% in the Asia-Pacific region and about 16% in North America, where it totaled $15.4 billion.
The broader sustainable bond market also grew during the quarter. Global issuance of labeled sustainable bonds — including green, social, sustainability, sustainability-linked, and transition bonds — increased 4% from the second quarter of 2025. Social bond issuance rose 18% to $42 billion, while sustainability-linked bond issuance was down 63% during the first half of the year.
Blue bonds, which finance projects related to oceans and other water resources, also reached a record for the first half of 2026. Issuance increased roughly sixfold from the same period last year to $3.7 billion, surpassing the $2.6 billion issued during all of 2025.
Why does it matter?
The record shows continued demand for green bonds even as other parts of the sustainable finance market have slowed. The growth was also concentrated geographically: Europe accounted for 58% of all labeled sustainable bond issuance in the second quarter, up from 44% a year earlier, while the Asia-Pacific and North American shares declined.
The North American decline was not uniform across issuers. Moody’s found that lower issuance from government agencies and municipal issuers drove the regional decline, while green bond issuance from corporations and financial institutions increased about 8% and 12%, respectively.
The figures also show diverging trends among sustainable finance products. Green and social bond issuance increased from a year earlier, while sustainability-linked bonds — which tie their financial terms to an issuer meeting specified sustainability targets rather than dedicating proceeds to particular projects — continued to decline.