Introduction

The shifting political landscape in the United States has drastically altered the state of environmental, social and governance (ESG) regulation and litigation. While the federal government has retreated significantly from ESG and climate regulatory requirements and has sought to curtail US state government regulation and litigation in this space, various US states have continued to use regulation and litigation to advance ESG and energy transition political and economic priorities. For example, California has moved forward with ambitious climate disclosure requirements while states like Texas and Florida have marshalled state resources to stifle climate and ESG regulatory programmes and have also looked to litigation to achieve similar policy objectives. For companies caught in the middle of the ESG maelstrom, the only certainty is that they will continue to need to calibrate and recalibrate their commercial and legal approaches to ESG to the benefit of their shareholders and other stakeholders, mindful of the ever-shifting and ever-evolving US regulatory and litigation landscape.

Federal ESG and Climate Regulatory Retreat

Under the second Trump administration, the executive branch has pulled away from ESG- and climate-related policies and priorities. Several executive agencies, particularly those impacting economic and environmental policy matters, have paused or revoked Biden-era enforcement proceedings, regulations and guidance documents.

The Securities and Exchange Commission (SEC) under President Donald Trump has undergone a shift from requiring ESG-related investment disclosures to focusing instead on pecuniary disclosure requirements. In March 2025, the SEC voted to end its defence of Rules 33-11275 and 34-99678, which required issuers to provide certain climate-related information and disclosures in their annual reports. These rules, promulgated under the Biden administration, were being challenged in the US Court of Appeals for the Eighth Circuit by several states. After the SEC vote, the court paused proceedings until the SEC formally repeals the rules through notice-and-comment rule-making or reverses course and chooses to defend the rules. The SEC also withdrew a pending ESG investment disclosure rule proposed during the Biden administration, further indicating that the SEC would focus more exclusively on pecuniary disclosure requirements.

Some Biden administration regulations remain intact. For example, Rule 35d-1 under the Investment Company Act of 1940 was amended in September 2023 to require certain funds to invest at least 80% of the value of their assets in accordance with the investment focus suggested in the fund’s name. This programme applies to all funds but was part of the Biden-era regulatory approach to ESG funds.

Perhaps the most consequential policy change that may occur is rescission of the Environmental Protection Agency’s (EPA) 2009 Endangerment Finding. In 2007, the US Supreme Court ruled that the EPA had the authority under the Clean Air Act to regulate greenhouse gas (GHG) emissions tied to climate change and indeed was required to regulate if it found that these emissions were a threat to public health. In 2009, the EPA issued its Endangerment Finding, determining GHG emissions from automobiles posed a threat to public health and safety and thus must be regulated. The Endangerment Finding has served as the legal basis for most climate regulations issued in the past 15 years, including national vehicle emission and fuel efficiency standards, limitations on methane emissions at oil and gas drilling sites, and emissions restrictions at coal and gas-fired power plants enacted by the Biden administration. On 1 August, the EPA proposed to rescind the Endangerment Finding and all GHG emissions regulations for motor vehicles and engines. EPA Administrator Lee Zeldin, along with Trump, has been highly critical of mainstream scientific consensus regarding climate change, often disputing or downplaying the risks posed by GHG emissions. A revocation of the Endangerment Finding would be seismic not only because it would undermine the existing GHG emissions regulatory structure, but also because in doing so it could lead to the revival of previously dismissed federal common law public nuisance claims against large emitters that were pre-empted by the EPA’s authority to regulate GHG emissions under the Clean Air Act.

Other regulations and policies favouring ESG and addressing climate risk have been targeted or paused. In 2022, the Federal Trade Commission (FTC) proposed updates to its Green Guides, non-binding guidance documents that help companies comply with marketing and advertising requirements when making environmental claims about their products or business. The proposals included further guidance on navigating carbon offset and renewable energy claims, direction to marketers when making carbon-neutral or low-carbon/carbon-negative claims about their products or business, and guidance on how and when companies can make claims about the recyclability of their products. The Trump administration has issued no updates on its review of the proposed amendments to the Green Guides, which were last updated in 2012. It is possible the proposed update will be modified by the Trump administration to be more business-friendly or shelved entirely.

Retirement and pension funds incorporating ESG practices into their investments have also faced scrutiny under Trump. The Department of Labor (DOL) under President Joe Biden adopted rule amendments under the Employee Retirement Income Security Act of 1974 (ERISA), which permitted fiduciaries to consider climate change and ESG factors when selecting retirement plan investments for employees. A lawsuit brought by 26 states challenged the DOL’s regulation, arguing ERISA precluded fiduciaries from considering social factors when making investment decisions. In May 2025, with the case pending in the Fifth Circuit, the DOL notified the court that it would no longer defend the regulation and plans to issue a new rule revoking the Biden-era rule. As a result, the case is not being actively litigated by either side and is currently stayed due to a lapse in appropriations from the government shutdown and pending any formal revocation of the Biden-era rule.

America’s Status in International Climate Agreements

The federal climate policy retreat has also included withdrawing the US from major international climate agreements. During his first term, Trump withdrew the US from the Paris Agreement, an international treaty signed in 2016 pledging to implement measures to stop the global surface temperature from rising more than 2°C above pre-industrial (late 19th-century) levels. After Biden re-entered the US to the agreement, Trump withdrew the US from the agreement once again.

The Paris Agreement was enacted under the United Nations Framework Convention on Climate Change (UNFCCC), a 1992 treaty between 198 signatories aimed at preventing GHG emissions from rising to dangerous levels. Trump has not yet acted to withdraw the US from the UNFCCC, but he has ordered Secretary of State Marco Rubio to review US participation in all international organisations, treaties and conventions and provide recommendations to the president as to whether the US should withdraw from any agreements, including the UNFCCC. Rubio has not yet publicly released those recommendations.

State Divergence on ESG and Climate Regulation and Enforcement

In the US, at the state level, ESG climate policies vary significantly. Some states have embraced ESG and climate-conscious measures, while others have actively restricted or discouraged the use of ESG policies.

In 2023, California Governor Gavin Newsom signed into law California Senate Bills 253 and 261 to enact the state’s landmark Climate Reporting Program. Senate Bill 253 requires entities doing business in California and with annual revenues in excess of USD1 billion to disclose Scope 1, 2 and 3 GHG emissions and obtain an independently prepared assurance of the report. The bill tasks the California Air Resources Board with adopting disclosure regulations for Scope 1, 2 and 3 emissions. Scope 1 and 2 emissions disclosures will be due in 2026 on a date set by the board, with Scope 3 disclosures due in 2027. Failure to comply may result in penalties up to USD500,000 per reporting year, but the Air Resources Board has discretion in implementing these penalties, particularly during roll-out in 2026. Senate Bill 261 requires that on or before 1 January 2026, entities doing business in California and with annual revenues in excess of USD500 million must prepare and disclose reports on their climate-related financial risks and planned measures to reduce and adapt to such risks. Failure to comply may result in penalties up to USD50,000 in a reporting year, but the Air Resources Board retains discretion in implementing penalties.

On 24 October 2025, ExxonMobil filed a federal lawsuit in the US District Court for the Eastern District of California alleging the Climate Reporting Program violated its First Amendment rights. Both bills require covered entities to comply with California’s Greenhouse Gas Protocol and Task Force on Climate-related Financial Disclosures, which ExxonMobil claims is an unconstitutional content-based restriction compelling speech. ExxonMobil also alleges these laws are pre-empted by SEC securities disclosures on financial and environmental risks. This comes after Judge Otis Wright of the Central District of California issued a 13 August 2025 decision denying the US Chamber of Commerce’s request for a preliminary injunction, alleging the climate disclosure laws violated its First Amendment rights.

Additionally, in recent years, some states, including New York and Vermont, have enacted or proposed polluter-pays laws requiring companies contributing substantial GHG emissions (mainly oil and gas companies) to pay into state funds designed to repair or mitigate future damage from climate change. For example, New York’s Climate Change Superfund Act, signed into law by Governor Kathy Hochul in December 2024, uses money collected from polluters to finance projects targeting improvements to infrastructure harmed by the effects of climate change, including repairs and upgrades to coastal wetlands, roads, bridges and water drainage systems.

In May 2025, the US Department of Justice (DOJ) sued New York and Vermont, alleging their polluter-pays statutes are unconstitutional extraterritorial regulations and are pre-empted by the Clean Air Act. Twenty-two state attorneys general also sued New York in a separate matter, making similar constitutional and pre-emption challenges in an effort to halt enforcement of the state’s climate superfund law. These suits are currently pending.

By contrast, at least nine states – including Alabama, Alaska, Idaho, Kentucky, North Dakota, Oklahoma, Texas, Utah and West Virginia – have passed legislation prohibiting the state from entering into a contract with a company unless the company submits a written certification that it does not boycott fossil fuels or that it does not refuse business from companies that fail to meet certain environmental standards. Other laws require the state to create a blacklist of companies that discriminate against fossil fuels. For example, Alabama Senate Bill 261 prohibits governmental entities from entering into a contract with a company that boycotts businesses failing to meet certain ESG standards, and it requires the company seeking to contract with the state to submit a written certification that it does not boycott the use of fossil fuels.

Additionally, at least 17 states have enacted legislation requiring state pension investment and proxy votes to avoid ESG factors in investment decisions and rely only on pecuniary factors. For example, Idaho Senate Bill 1405 prohibits public entities engaged in investment activities from considering ESG factors in a way that could violate the prudent investor rule. The law does, however, allow public entities to offer ESG investment alternatives, provided such investments are not required. Other states have adopted resolutions calling for the cessation of ESG factors in pension investments, and state attorneys general have issued guidance documentation or commenced litigation targeting companies for failing to disclose their ESG investing activities.

Conversely, at least six states – including California, Illinois, Maine, Minnesota, New York and Oregon – have enacted legislation or mandates requiring pension and retirement funds to divest from fossil fuel companies. For example, the New York State Common Retirement Fund adopted measures restricting investments in eight oil and gas companies and moving away from climate-related investment risks. Other states – including Massachusetts, New Jersey, Vermont and Washington – have legislation pending that seeks to adopt similar fossil fuel divestment measures.

Trends in ESG and Climate-Related Litigation

ESG and climate-related litigation under federal law

While the federal government has scaled back ESG regulations and enforcement actions, federal law still provides a mechanism to enforce disclosure requirements and bring environmental claims. First, shareholders have sued under federal securities law where a publicly traded company has made allegedly fraudulent statements or omissions about ESG investments in connection with the offering of securities or in annual reports to shareholders touting the environmental or other ESG-related practices of the company. For example, in 2022, shareholders brought a class action against a developer, owner and operator of wood pellet production plants, alleging greenwashing under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934. The company allegedly made repeated misstatements and omissions to investors regarding the environmental sustainability of its wood pellet production and wood harvesting practices. The case was eventually voluntarily dismissed. While these cases remain an ever-present risk, to date there have not been many securities fraud claims pursued on theories of ESG-related misstatements or omissions, particularly when compared to a substantial volume of consumer fraud class actions (brought under state consumer protection laws and common law theories) based on alleged greenwashing in environmental marketing claims (discussed in more detail in the following section).

Additionally, the FTC Act and Lanham Act provide consumers and competitors, respectively, with the means to bring claims alleging false or deceptive marketing and advertising practices. Private litigants have sued under these laws to challenge marketing statements by companies touting the environmental benefits or sustainability of their products and business. For example, in September 2025, an earplug maker sued another earplug maker, under the Lanham Act, alleging false advertising. The plaintiff alleged that the defendant’s marketing claims that its earplugs are eco-friendly and made of bio-based material were false and that the defendant was aware of this. The case is currently pending in the Central District of California.

ESG and climate-related claims under state law

State consumer and environmental protection laws are increasingly being utilised to bring suits for alleged greenwashing. Plaintiffs have brought class actions alleging greenwashing under state consumer protection laws targeting false advertising, deceptive marketing and misleading statements, as well as common law claims such as fraud and breach of warranty. The success of these cases often depends on where they are brought: California and New York have some of the most robust consumer protection laws, inviting greenwashing class action claims. For example, consumers brought a class action against a packaged coffee company, alleging claims on the packaging that its coffee pods were recyclable were false and misleading. The claims – brought under California’s Consumer Legal Remedies Act, False Advertising Law and Unfair Competition Law – resulted in a monetary settlement for the consumer class. In contrast, other state consumer protection laws, such as those of Alabama, Georgia, Missouri and Tennessee, explicitly prohibit class actions, making them less-friendly venues for ESG and environmental consumer claims.

In recent years, various cities, states and municipalities across the country in Democratic-leaning jurisdictions have sued energy companies under theories of public nuisance and various other state law claims. For years, these lawsuits have ping-ponged back and forth between state and federal courts, as defendants have argued that under the Clean Air Act and other federal regulations the claims are fundamentally federal claims that must be pursued (and dismissed under theories of displacement, political question doctrine and others) in federal courts. Those efforts to remove cases from state courts (perceived to be more friendly to plaintiffs) to federal courts have largely proven unsuccessful, and thus the cases are being litigated in state courts.

In a recent example of such a suit, in May 2025, Hawaii Attorney General Anne E. Lopez filed a suit against major energy companies, including ExxonMobil, alleging the companies concealed and misrepresented the harmful effects of their fossil fuels. Lopez sought punitive damages under a theory of public nuisance on behalf of the people of Hawaii.

The suit is currently stayed, however, because shortly before it was filed, the DOJ brought an action to enjoin the Hawaii suit, alleging it was unconstitutional and pre-empted by the Clean Air Act.

Anti-ESG and climate-related actions

As some states and companies have continued implementing ESG and climate-conscious laws and policies, other public and private parties have challenged these actions.

State attorneys general have launched investigations and lawsuits targeting ESG efforts and environmental laws. For example, there is a pending suit filed by 22 state attorneys general challenging New York’s Climate Change Superfund Act, which essentially seeks to create a polluter-pays regime whereby companies alleged to be large contributors to carbon emissions are required to pay to remediate the effects of climate change. The private companies that are the target of such laws have also sought to challenge them on various legal and constitutional grounds.

In addition, various state attorneys general have also used their state consumer protection laws to target ESG efforts. In 2023, for example, Tennessee Attorney General Jonathan Skrmetti sued a major asset manager for breaching Tennessee’s consumer protection laws in failing to disclose investments targeting net-zero goals. The parties settled the case in January 2025. And in September 2025, a total of 16 state attorneys general sent letters to big tech companies, probing the legitimacy of the companies’ renewable energy certificates.

Companies have also challenged ESG actions by activist shareholders under federal securities law. For example, ExxonMobil sued to preclude an activist shareholder from issuing a proposed voting measure calling for ExxonMobil to accelerate its reduction of GHGs. ExxonMobil brought the suit under the Securities Exchange Act, Rule 14a-8, which governs the manner and substance in which a shareholder proposal may be brought. The suit was dismissed for mootness once the defendants agreed not to pursue such proposals going forward, but the suit highlights how federal securities law can be used by private plaintiffs to strike back against ESG efforts. More recently, in October 2025, ExxonMobil brought a First Amendment challenge to California’s Climate Reporting Program, arguing that it compelled speech ExxonMobil does not agree with in violation of its constitutional free speech rights.