ESG+ Newsletter – 05 March 2026

SEC revision fuels ESG litigation and uncertainty in shareholder engagements  

In November 2025, the SEC announced revisions to its administration of the Rule 14a-8 no-action letter process, which included reducing staff sign-off required for excluding shareholder proposals, giving executives more discretion to exclude proposals on proxies. A ramification of this, according to  Reuters, is regulatory uncertainty and heightened litigation risk, most notably relating to ESG driven proposals. Recently filed lawsuits challenge the exclusion of ESG proposals at AT&T (workforce diversity disclosure), Axon Enterprise (political spending transparency), and PepsiCo (animal welfare in the supply chain). AT&T and PepsiCo ultimately agreed to include the proposals after legal challenges, allowing shareholder votes. Yet, the SEC revision will continue to increase ESG-related litigation risk by shifting greater responsibility onto companies to justify proposal exclusions. As a result, companies are preparing for their exclusion decisions to be tested in federal court, rather than resolved through the SEC staff’s no-action process.  

Possible rollback of EU climate policy will disadvantage early leaders   

The EU’s push to dilute its flagship climate policies in the name of competitiveness risks punishing companies and countries that have already invested heavily in decarbonisation, according to the  Financial Times. The potential weakening of policies such as ETS and CABM has unsettled investors and drawn the ire of European industry leaders who have invested heavily in decarbonisation based on clear climate policy direction. They are calling for long-term stable policies that future proof technologies such as green steel, chemicals and electrification. The issue is divisive across the bloc with some member states considering acting on a national level. Ultimately, countries and their largest businesses feel they may be punished for doing the right thing on climate ahead of time, calling into question the lack of consistency in regulatory efforts from the EU.  

The legalities of circular fashion

With EU lawmakers preparing legislation to hold producers of fashion and textiles accountable for the full lifecycle of their products, Lewis Akenji (co-chair of the Materials & Consumption Taskforce of the Club of Rome and executive director of the Hot or Cool Institute) has put forward five questions for the EU to answer in this legislation. The fashion and textiles industries are responsible for as much as 10% of global greenhouse gas emissions, but, until recently, have flown under lawmakers’ radar. The extended producer responsibility (EPR) legislation expected by June 2027 is intended to promote circular economy practices by encouraging environmentally conscious design, standardising recycling, and forcing businesses to internalise waste management costs of fashion waste. However, there are lessons from how EPR has fared in the past when applied to other sectors. Writing for Sustainable Views, Akenji emphasises five key considerations that fashion EPR must address in order to succeed, namely,

1. Identifying  who the ‘producer’ is in a global, platform-driven market, with successful EPR legislation contingent on the producer taking responsibility.     
2. Ensuring EPR will drive design for the environment, addressing environmental harm associated with the dumping of fashion waste in developing countries, sometimes disguised as clothing donations, going beyond recycling fashion waste to focus on upstream measures that limit overproduction. 
3. Lifting labour standards along the supply chain through stringent monitoring and compliance.
4. Preventing harmful waste exports by legislating robust public oversight to ensure transparency and accountability. 
5. Breaking fashion’s deepening reliance on fossil fuels and synthetic fibres.  

New climate-related disclosures set to be released in California  

The California Air Resources Board (CARB) has approved the California Greenhouse Gas Reporting and Climate Financial Risk Disclosure Initial Regulation, as reported by  ESG Today. This new law will require thousands of US companies to disclose emissions from within their value chain and report on climate-related financial risks to their business. The first deadline for GHG emissions disclosures for in-scope companies is August 10, 2026.

The newly adopted regulations comprise two components: SB 253 and SB 261. SB 253 mandates that companies operating in California with revenues exceeding $1 billion report on their Scope 1, 2, and 3 emissions. In this first year of disclosures, only Scope 1 and 2 emissions are required, with Scope 3 required from 2027 onwards. SB 261 requires companies with revenues greater than $500 million to prepare a report disclosing their climate-related financial risks and the measures being taken to reduce those risks. Over 4,000 companies are expected to be subject to these new requirements. The regulations were initially approved in 2023 but continue to face legal challenges surrounding their implementation. The Ninth Circuit Court of Appeals issued an injunction late last year in an attempt to pause implementation. Due to these delays, reporting under SB 261 is currently voluntary. However, 120 climate risk-related reports have already been submitted, indicating early support for the new regulation.  

AI reshapes the proxy voting landscape  

This week, the Harvard Law School Forum on Corporate Governance highlighted a post by Will Goodwin, co-founder of Tumelo, examining AI’s growing role in proxy voting. Large institutional investors often vote at hundreds or thousands of shareholder meetings annually. Each vote demands research, application of policies, and a defensible rationale that must be produced under tight deadlines and with limited resources. Traditionally, investors have relied on third-party proxy advisors to implement these decisions efficiently. That model is now under pressure. Rising expectations for fiduciary accountability, scrutiny of stewardship practices, and advances in AI are prompting stewardship teams to reconsider how much research should be managed in house. According to Goodwin, AI can now generate fully sourced voting research and recommendations within minutes of a meeting being announced, based on policies defined internally by investors. In addition, outputs are traceable to both the applied rule and source documents, reinforcing transparency and accountability. In January, JPMorgan and Wells Fargo became the first major investors to announce plans to bring proxy voting research in house. More institutions could follow and this is an important trend to watch for issuers seeking to effectively engage with shareholders and maximise their AGM outcomes.