In this week’s edition of Economy and Society:
- Federal judge blocks New York climate superfund law
- ISS sues to block Oklahoma proxy advisor law
- California loosens first-year climate reporting requirements
- UK proposes reducing mandatory ESG disclosures
- Companies scale back ESG metrics in executive pay
In the states
Federal judge blocks New York climate superfund law
What’s the story?
Chief Judge Brenda Sannes of the U.S. District Court for the Northern District of New York blocked New York's Climate Change Superfund Act on Aug. 31, ruling that federal law preempts the state's effort to require fossil fuel companies to help pay for climate-related infrastructure and adaptation costs.
New York enacted the law in 2024 to establish a climate adaptation cost-recovery program requiring certain fossil fuel companies to contribute a combined $75 billion toward infrastructure projects intended to help the state adapt to climate change. The law imposed strict liability and assigned companies' shares based on greenhouse gas emissions attributable to fossil fuel extraction and crude-oil refining from 2000 through 2024.
A coalition of 22 state attorneys general led by West Virginia Attorney General J.B. McCuskey (R), along with coal, oil, and gas industry groups, sued New York in 2025, arguing that the state could not impose costs based on greenhouse gas emissions occurring outside its borders and that the federal Clean Air Act preempted the law.
Sannes agreed with the plaintiffs that federal law preempted the state law. She wrote that the Climate Change Superfund Act is "simply beyond the limits of state law" and "operates within an area of law 'in which the federal interest is so dominant'" that it cannot be enforced. The court also found that imposing costs based on emissions associated with foreign fossil fuel producers was preempted by the federal government's foreign affairs powers.
McCuskey said, "This is a major victory in the fight against liberal states, trying to balance their budgets on the backs of our hard-working men and women in the coal, oil and gas industries. We were the first to challenge this law because we saw it for what it was — a money grab by the elites in New York, who want to punish West Virginians for doing the jobs that enable them to heat their homes and build their cities."
Gov. Kathy Hochul’s (D) office said it was reviewing the decision to determine possible next steps. Hochul representative Ken Lovett said, “Taxpayers shouldn’t have to foot the bill for damages caused by polluters.”
Why does it matter?
The ruling limits New York's attempt to make fossil fuel companies pay for infrastructure and other costs associated with adapting to climate change. It also addresses a broader federalism dispute over how far states can independently regulate or impose costs on companies for greenhouse gas emissions associated with activity outside their borders.
The case also intersects with the Trump administration's efforts to challenge state climate and energy policies. President Donald Trump (R) issued an executive order in April 2025 directing the U.S. attorney general to identify and take action against state and local energy policies that the administration determined may be unconstitutional, preempted by federal law, or otherwise unenforceable. The order specifically criticized New York's Climate Change Superfund Act.
What’s the background?
Gov. Kathy Hochul (D) signed the Climate Change Superfund Act in December 2024. The law drew on New York's existing environmental cleanup programs but sought to recover climate adaptation costs from fossil fuel companies based on their attributed contributions to greenhouse gas emissions.
The coalition of 22 state attorneys general challenged the law in federal court in 2025. After Trump issued his April 2025 executive order targeting certain state climate and energy policies, the U.S. Department of Justice filed a statement of interest supporting the plaintiffs in the challenge to New York's Climate Change Superfund Act.
New York's law is part of a broader state-level effort to make fossil fuel companies contribute to climate-related costs. Vermont enacted a similar climate superfund law, which the Trump administration also identified in its executive order and subsequently challenged in court.
ISS sues to block Oklahoma proxy advisor law
What’s the story?
Institutional Shareholder Services (ISS), a proxy advisory firm that provides voting recommendations to institutional investors, sued to block an Oklahoma law requiring proxy advisors to provide additional financial analysis when recommending votes against company management.
ISS filed the lawsuit against Oklahoma Attorney General Gentner Drummond (R) over HB 4429, which Gov. Kevin Stitt (R) signed in May. The law is scheduled to take effect Nov. 1. ISS is seeking a preliminary injunction to prevent the state from enforcing it.
HB 4429 requires proxy advisors recommending a vote against company management to provide written financial analysis supporting the recommendation. ISS argues the requirement violates the First Amendment by imposing requirements based on the viewpoint expressed in its voting advice. The firm also argues the law would increase compliance costs.
ISS said in its filing, "HB 4429 singles out proxy advisors for special regulation; the law does not apply to other speakers who also advise on votes, including company boards, shareholders, those who solicit proxy votes and charities."
The Oklahoma attorney general's office, which would enforce the law under the state's Consumer Protection Act, denied ISS's allegations in an initial court filing.
Why does it matter?
The Oklahoma lawsuit is the latest in a series of cases in which ISS and fellow proxy advisory firm Glass Lewis have sued states over laws regulating their voting recommendations. Federal judges have temporarily blocked similar laws in Texas, Kansas, and Indiana while litigation continues.
The Oklahoma law — like the Kansas and Indiana laws — imposes additional requirements when a proxy advisor recommends voting against company management. In June, federal judges blocked the Kansas and Indiana laws on First Amendment grounds. In the Kansas case, U.S. District Court Judge Holly Teeter wrote that the law "regulates speech based on whether the expressed opinion is for or against company management."
More than a dozen states considered legislation regulating proxy advisory firms in 2026, making the court challenges relevant beyond Oklahoma. ISS and Glass Lewis together account for more than 90% of the proxy advisory market and provide voting recommendations to institutional investors on issues including director elections, executive compensation, and shareholder proposals.
What’s the background?
Oklahoma House Speaker Kyle Hilbert (R) authored HB 4429, and Stitt signed it in May 2026. The legislation is similar to model legislation promoted by Consumers Defense, a nonprofit organization that opposes ESG investing.
The legal challenges began in Texas, where ISS and Glass Lewis sued in July 2025 over a state law regulating proxy advice involving environmental, social, and governance (ESG) and other nonfinancial considerations. A U.S. district court judge temporarily blocked parts of the Texas law in August 2025.
Kansas and Indiana enacted similar proxy advisor disclosure laws in 2026. Federal judges temporarily blocked both laws in June, finding that the firms were likely to succeed on their First Amendment claims.
California loosens first-year climate reporting requirements
What’s the story?
The California Air Resources Board (CARB) released new guidance on Sept. 2 giving companies additional flexibility as they prepare for the state's first greenhouse gas emissions reporting deadline on Nov. 10.
California's SB 253 requires companies with more than $1 billion in annual revenue that do business in the state to report their Scope 1 emissions — those produced directly by the company — and Scope 2 emissions — indirect emissions from purchased energy — during the first reporting cycle.
CARB said it would "exercise enforcement discretion" during the 2026 reporting cycle. Companies may use Scope 1 and Scope 2 emissions data from their previous fiscal year based on information they already had or were collecting when CARB issued an enforcement notice in December 2024. Companies that were not collecting or planning to collect the data at that time may instead submit a statement on company letterhead stating that they will not report emissions data during the first cycle.
CARB will also accept several reporting formats, including existing annual reports, emissions data submitted to other programs or voluntary initiatives, and CARB's draft reporting template. The agency will accept 2026 submissions regardless of whether companies have obtained limited assurance, an independent review intended to provide confidence in the reported information.
Why does it matter?
The guidance gives companies more flexibility in complying with California's first emissions reporting requirements while CARB continues developing its longer-term regulations. Companies can rely on existing emissions data and reporting formats rather than immediately adopting a single state-prescribed approach, and some companies that had not begun collecting emissions data by December 2024 will not have to provide that data during the first reporting cycle.
CARB previously said it planned to use enforcement discretion during the first reporting cycle because it "recognizes that companies may need some lead time to implement new data collection processes" necessary to fully report their Scope 1 and Scope 2 emissions.
The relief applies to the initial reporting cycle. CARB is developing requirements for 2027 and subsequent years through a rulemaking process covering greenhouse gas accounting methods, reporting deadlines, assurance requirements, and reporting formats.
What’s the background?
Governor Gavin Newsom (D) signed SB 253 in October 2023. It requires certain companies doing business in the state to report Scope 1, Scope 2, and eventually Scope 3 emissions, which include indirect emissions throughout a company's value chain.
CARB originally set Aug. 10, 2026, as the first deadline for companies to report Scope 1 and Scope 2 emissions. The agency later moved the deadline to Nov. 10 while it revised its implementing regulations. A CARB representative said the new deadline "will help ensure reporting entities have additional clarity following approval of the final regulation before reporting is due." CARB released a preliminary list identifying more than 4,000 companies that could be subject to the requirements.
Newsom also signed SB 261 in 2023. It requires certain companies with more than $500 million in annual revenue to disclose climate-related financial risks. The U.S. Court of Appeals for the Ninth Circuit temporarily blocked enforcement of SB 261 in November 2025 while litigation over the law continues.
Around the world
UK proposes reducing mandatory ESG disclosures
What’s the story?
The UK Department for Business, Innovation, Science and Trade launched a consultation on Sept. 7 proposing changes to corporate reporting requirements that could eliminate explicit requirements for companies to report on several environmental and social topics.
The proposal would overhaul the strategic report, the section of companies' annual reports covering performance, risks, strategy, and non-financial matters. The UK government is considering removing specific reporting requirements covering companies' environmental effects, employees and diversity, social responsibility, community engagement, human rights, and anti-corruption and anti-bribery measures.
The UK government said the strategic report "has lost its way and has become too long, complicated and unfocused."
Companies would still report environmental and social matters when they are financially material. The UK government said, "This would not mean that companies should stop reporting on these specific topics where these are financially material to their performance or operations, even though the explicit topic requirements are proposed to be removed. The proposal is for the information topics covered in the strategic report to reflect the nature of the company."
The consultation also considers creating a new very large company category to determine which companies must make certain non-financial disclosures and giving companies more flexibility over where they include climate and sustainability information in their strategic reports. The consultation runs through Nov. 30.
Why does it matter?
The proposal could shift UK corporate reporting away from requiring disclosures on specified ESG topics and toward reporting based more on whether companies determine information is financially material.
The changes could also alter which public and private companies face non-financial reporting requirements. The UK government has not yet proposed a specific threshold for its potential very large company category and is considering whether mandatory non-financial disclosures from private companies are necessary to assess investment risk.
On Wall Street and in the private sector
Companies scale back ESG metrics in executive pay
What’s the story?
According to a July 21 report from The Conference Board, U.S. public companies are using ESG metrics less frequently in executive compensation plans.
The report analyzed Russell 3000 and S&P 500 executive compensation disclosures from 2023 through 2025. It found that during that period, companies reduced their use of broad ESG measures and some specific environmental and human-capital metrics in short-term incentive plans, while increasing their use of some governance, social, cash-flow, and expense measures.
Nonfinancial measures remain common. Just over half of companies in both indexes combined financial and nonfinancial metrics in short-term incentive plans in 2025. Among companies reporting the relative weight of those measures, the typical split was about 70% financial and 30% nonfinancial for the S&P 500 and 75% to 25% for the Russell 3000.
The report said, "The data suggest a more nuanced shift: boards are not abandoning nonfinancial measures but becoming more selective about which measures belong in pay plans and how they connect to business performance."
Why does it matter?
The findings suggest companies are moving away from broad ESG labels in executive compensation rather than abandoning nonfinancial performance measures. The report found companies increasingly favor more targeted measures tied to business performance, operations, governance, risk, and strategy.
Long-term incentive plans remain more heavily tied to financial results and shareholder returns. Among companies combining financial and nonfinancial measures in those plans, the median split in 2025 was 80% financial and 20% nonfinancial for the S&P 500 and 75% to 25% for the Russell 3000.