ESG Litigation & Enforcement Tracking
June 20, 2024 | Several State Attorneys General Defend Diversity, Equity, and Inclusion Initiatives Within Educational, Legal, Business Communities
Several state attorneys general drafted a comment letter addressing diversity, equity, and inclusion initiatives within legal and business communities. The letter from the attorneys general challenges attempts to correlate diversity measures with racial discrimination, among other things, and ultimately concludes by establishing the importance of diversity, equity, and inclusion programs and efforts in corporate, educational, legal, and philanthropic spaces. One key point the attorneys general make is that “companies with diverse leadership teams are associated with higher financial returns, and higher social and environmental impact scores.” The letter follows a letter from a separate group of attorneys general challenging the American Bar Association’s standards for approval of law schools after the Supreme Court’s recent decisions on the constitutionality of considering race in higher education admissions.
May 21, 2024 | Several State Attorneys General Oppose New Federal Rule on Environmental Standards for Infrastructure
Several state attorneys general filed suit against the White House Council on Environmental Quality (CEQ), challenging the CEQ’s final rule implementing the National Environmental Policy Act (NEPA) that would require federal agencies to consider a variety of environmental and related factors—including climate change, environmental justice, and Indigenous Knowledge—when conducting environmental reviews under NEPA, among other things. The attorneys general contend that the proposed changes are arbitrary, without a valid federal statutory basis, and likely to result in uncertain and unpredictable outcomes. The attorneys general ultimately request, in relevant part, that the district court declare the final rule arbitrary and capricious, set aside the final rule, and enjoin the CEQ from implementing the final rule altogether.
April 23, 2024 | Several State Attorneys General Petition District Court to Defend EPA’s Rule on Federal Greenhouse Gas Emissions Standards
Several state attorneys general moved to intervene in a case brought by attorneys general from other states that challenges the U.S. Environmental Protection Agency’s (EPA) final rule raising greenhouse gas emissions standards for light- and medium-duty vehicles (e.g., passenger cars, large pickup trucks, vans). The EPA’s final rule would impose more stringent standards on greenhouse gas and other harmful pollutant emissions (e.g., nitrogen oxides, particulate matter) for light- and medium-duty vehicles with model years 2027 and later. The EPA estimates that, if implemented, its final rule would reduce greenhouse gas emissions by 7 billion metric tons through 2055.
The attorneys general seeking to intervene in the case argue that their right to intervene and defend the EPA’s final rule is well established since harmful emissions that threaten public health and the environment would exacerbate the climate change and public health harms their states have already experienced. The attorneys general opposing the EPA’s final rule did not oppose the motion to intervene in this case.
In a separate case, several attorneys general present similar arguments to intervene in a case brought by attorneys general from other states that challenges the EPA’s final rule raising greenhouse gas emissions standards for heavy duty vehicles (e.g., freight trucks, delivery trucks, buses, shuttles, street sweepers). The attorneys general opposing the EPA’s final rule either did not oppose the motion to intervene or took no position on the motion.
April 1, 2024 | District Court Blocks Federal Agencies’ Net-Zero Highway Emissions Rule
A federal district court in Kentucky found that the U.S. Department of Transportation and Federal Highway Administration’s (FHWA) highway emissions rule exceeds the FHWA’s statutory authority and is arbitrary and capricious. The rule, if implemented, would require states receiving funds from the FHWA to measure greenhouse gas emissions and establish declining CO2 targets for on-road emissions to achieve net-zero emissions by 2050. In broad strokes, the court’s reasoning is two-fold. First, the rule, as currently written, would allow the federal government to usurp state sovereignty and authority. Second, the rule advances no lawful goal, especially since the plaintiff states insist they would not seek to achieve declining CO2 emissions from their national highway system roadways.
Although the court granted the states’ motion for summary judgment on the issue, the court declined to grant their request to vacate the rule or permanently enjoin its enforcement. Rather, the court limited its ruling to the 21 states since the rule “operates on a state-by-state basis, with no one state’s compliance or coercion affecting that of any other state.” The court also highlighted that litigation from other jurisdictions could further complicate its ruling and requests that the parties file supplemental briefs on a more well-adjusted remedy.
The 21 states implicated in this decision are Alabama, Alaska, Arkansas, Florida, Idaho, Indiana, Iowa, Kansas, Kentucky, Mississippi, Montana, Nebraska, North Dakota, Ohio, Oklahoma, South Carolina, South Dakota, Utah, Virginia, West Virginia, and Wyoming.
February 27, 2024 | Comments on GSA Proposed Regulation re: Reduction of Single-Use Plastic Packaging.
Several state attorneys general drafted a comment letter that supports the U.S. General Services Administration’s (GSA) proposed rule to reduce federal purchases of single-use plastic packaging. In their comment letter, the AGs both express support for the GSA’s efforts to limit the federal government’s procurement of single-use plastics and urge the GSA to develop a more stringent proposed rule that would eventually permanently eliminate the federal government’s ability to procure and acquire single-use plastics.
January 12, 2024 | Commonwealth of Kentucky v. Federal Highway Administration, No. 5:23-cv-00162 (W.D. Ky.).
Several state attorneys general filed a preliminary injunction seeking to enjoin the U.S. Department of Transportation and the Federal Highway Administration (FHWA) from implementing and enforcing their highway emissions rule. The emissions rule would require states receiving funds from the FHWA to measure greenhouse gas emissions and establish declining CO2 targets for on-road emissions to achieve net-zero emissions by 2050. The AGs challenge the rule under several legal doctrines, including that the rule is arbitrary and capricious, and ultimately assert that the rule does not adequately consider the far-reaching impacts of the rule on states with more rural areas and growing populations.
January 8, 2024 | U.S. Department of Commerce Notice Entitled Business Diversity Principles, 88 Fed. Reg. 83,380 (Nov. 29, 2023), DOC-2023-0003.
Several state attorneys general drafted a comment letter that challenges the U.S. Department of Commerce’s (DOC) draft “Business Diversity Principles,” which seek to advance “best practices related to diversity, equity, inclusion, and accessibility (DEIA) in the private sector.” In their comment letter, the AGs assert that the draft violates the Equal Protection Clause of the U.S. Constitution, Title VII of the Civil Rights Act of 1964, and other legal doctrines. The AGs oppose the DOC’s rule and hope to work with the DOC to draft new guidance on DEIA practices in the private sector.
December 14, 2023 | Several State Attorneys General Petition Congress to Defend a Company’s Right to Consider ESG Factors When Making Investment Decisions
Several Attorneys General wrote a letter to the United States Congress requesting that Congress defend fund managers’ use of ESG factors when developing investment strategies. In their letter, the Attorneys General asserted that ESG factors can be critical to prudent investment decision-making, especially considering that not all ESG-based investment opportunities prioritize environmental and social policy preferences over returns. In fact, the Attorneys General explicitly expressed that their letter does not advocate for using ESG factors to promote policy goals. Rather, the Attorneys’ General position is that integrating ESG factors into investment decision-making can help maximize returns for investors while also helping companies hedge against risks present in fluctuating natural environments and financial markets. The Attorneys General ultimately sought Congress’s help in protecting investor returns and the broader economy by ensuring fund managers can consider a broad range of information when making investment decisions.
October 26, 2023 | Several Attorneys General Appeal Decision Upholding Federal Rule that Allows ESG Investments
Several Attorneys General announced their decision to appeal a federal district court decision that upheld the U.S. Department of Labor’s (DOL) rule that would allow investment fund managers to direct funds to ESG investments. The Attorneys General asserted that the rule runs counter to the Employment Retirement Income Security Act of 1974 and exceeds the DOL’s authority. The Attorneys’ General appeal is currently pending before the U.S. Court of Appeals for the Fifth Circuit.
October 17, 2023 | Texas Attorney General Issues Guidance to State Government Entities Regarding Texas’ Laws Prohibiting Contracts with Companies Maintaining ESG and other Restricted Policies
Texas’ Attorney General issued an advisory letter explaining that a recent string of Texas laws restricts government entities from doing business with companies that boycott energy companies, discriminate against firearm entities or associations or boycott Israel. In the advisory letter, the Attorney General identifies several entities that, due to the string of recent laws, Texas state agencies and political subdivisions will not be able to contract with for certain goods and services. The Texas Attorney General further explains that government entities may not blindly rely on a company’s written verification in lieu of considering other, publicly available evidence when evaluating whether they can do business with companies in Texas. Such publicly available evidence, according to the Texas Attorney General, can include membership in or public partnership with the Net Zero Alliance or any other entity that espouses a commitment to ESG policies. The Texas Attorney General ultimately advises that Texas law requires government entities to exercise due diligence in upholding and enforcing the Texas-specific restrictions.
September 13, 2023 | Virginia AG Warns the NZFPSA of Potential State and Federal Law Violations
Virginia’s attorney general led efforts to warn the Net Zero Financial Service Providers Alliance (NZFPSA) that some of its practices may violate state and federal law. In particular, the attorney general coalition expressed concerns that the NZFPSA’s goal to align its services and products to achieve net-zero greenhouse gas emissions, to implement the terms of the Paris Agreement, and to publicly report its collective efforts toward these goals could: (1) result in an artificial and potentially unlawful restraint of trade or commerce; (2) unlawfully mislead consumers and other persons about conflict of interest issues and the climate-related agenda’s viability; and (3) result in undue, widespread market manipulation with potentially detrimental effects. The AG coalition requested that the NZFPSA provide written responses to the coalition’s concerns.
August 9 & August 10, 2023 | Kentucky Challenges EPA’s Rule on Greenhouse Gas Emissions for Its Homegrown Coal-Fired Power Plants; California Supports It
Kentucky’s attorney general joined a challenge to the EPA’s proposed rule that would cut greenhouse gas emissions by several thousand metric tons (several million for certain gas types) from fossil-fuel-fired power plants through the next several years. The AG asserted that the EPA’s proposed rule would require Kentucky’s coal-fired power plants to either adopt potentially unreasonably expensive technologies or cease operation altogether due to the new emission standards. The AG noted that Kentucky’s coal plants generate a substantial amount of energy for the state and warned that the proposed rule may have a detrimental impact on the statewide, and then national, electric grid. The AG’s challenge comes after California’s attorney general joined efforts to support the proposed rule and advocated for standards that would help industries achieve the emissions standards more quickly.
State of Kentucky Office of Attorney General, Attorney General Cameron Stands Up for Kentucky Coal, Again; State of California Office of Attorney General, Attorney General Bonta Supports EPA’s Proposed Rule Regarding Fossil Fuel-Fired Power Plants
July 31, 2023 | Arkansas AG Appoints Longtime Political and Legal Figure to ESG Oversight Committee to Help Determine Who Discriminates Based on ESG Factors
Arkansas’s attorney general appointed a longtime Arkansas political and legal figure to the state’s new ESG Oversight Committee, which was created “to determine a list of financial services providers that discriminate against energy, fossil fuel, firearms, or ammunition companies or otherwise refuse to deal based on environmental, social justice, and other governance-related factors.” If a company is included on the ESG Oversight Committee’s list, Arkansas must divest its direct and indirect holdings with the company and the state will be prohibited from investing its cash funds with the company. Arkansas’s treasurer will maintain the most updated list of companies that are violating Arkansas Act 411, the law that created the ESG Oversight Committee, on the official website.
State of Arkansas Office of Attorney General, Attorney General Griffin Names Former Senate Parliamentarian and Chief Legal Counsel to ESG Oversight Committee
December 1, 2022 | North Carolina Attorney General Awards Nearly $700,000 in Grants to Support Environmental Efforts in North Carolina
North Carolina’s attorney general (AG) announced $685,327.21 in grants to various recipients, including Eastern Carolina University, the City of New Bern, and The Conservation Fund, to preserve natural resources and help support work to ensure clean air and water in eastern North Carolina. The grants were awarded through the Environmental Enhancement Grant program, which began as a collaboration between the North Carolina AG’s Office and Smithfield Foods. Smithfield provides $2 million to the state every year to fund environmental projects across North Carolina.
State of North Carolina Office of Attorney General, Attorney General Josh Stein Announces More Than $685,000 in Environmental Grants for Eastern NC
October 24, 2022 | Attorneys General Petition the SEC to Reopen Comment Period on ESG and Climate Investing Rules
Several state attorneys general (AGs) petitioned the SEC to extend the reopened comment period for multiple rulemaking releases and requests for comment after the SEC reported it never received some public comments submitted through its internet comment form due to technological errors. In response to the lost comments, the SEC reopened the comment period on 11 rulemaking releases and one request for comment for 14 days. The state AGs contend that this shortened comment period does not adequately ensure interested parties can comment on the SEC’s rules.
Montana’s AG points out that this shortened comment period may be troubling since some of the rulemaking releases contain updates on ESG investment practices and a climate disclosure rule. The state AGs assert that these and similar proposed rules may reorder companies’ priorities from maximizing shareholder returns to improving climate reputation and may violate the First Amendment and exceed the SEC’s statutory authority.
U.S. Securities and Exchange Commission, SEC Reopens Comment Periods for Several Rulemaking Releases Due to Technological Error in Receiving Certain Comments
October 19, 2022 | Multistate Coalition of Attorneys General Investigates Major Banks for Their Involvement with Foreign Banking Alliance and ESG Investment Strategies
A multistate coalition of attorneys general (AGs) served civil investigative demands on several major banks to subpoena documents relating to the banks’ involvement with the United Nations’ Net-Zero Banking Alliance (NZBA). The NZBA requires its member banks to set emissions reduction targets in their investment and lending portfolios to achieve net-zero emissions by 2050. This investment strategy has been coined “ESG investing” for its potential focus on environmental, social, and governance factors rather than solely focusing on maximizing shareholder returns. Virginia’s AG joined the coalition to ensure Virginia farmers and companies that deal with fossil-fuel-related activities are not punished and to investigate whether these major American banks have ceded their authority to a foreign body.
State of Virginia Office of Attorney General, Attorney General Miyares Joins 19 State Coalition in Launching Investigation into Six Major Banks over ESG Investing
October 13, 2022 | Attorneys General Submit Formal Comments Against the Federal Highway Administration’s Proposed Rule Requiring Net-Zero Highway Emissions
Several state attorneys general (AGs) formally commented on the Federal Highway Administration’s (FHA) proposed rule that would require states to measure greenhouse gas (GHG) emissions and establish declining GHG emission targets for on-road emissions to achieve net-zero emissions by 2050. For example, Montana’s AG asserts that the proposed rule both exceeds the FHA’s authority to regulate GHG emissions and fails to adequately consider the major questions doctrine, which generally requires an agency to have clear congressional authorization to decide an issue of major national or political significance.
In addition to arguing that the proposed rule is an issue of major significance – and thus violates the major questions doctrine – the state AGs also contend that the proposed rule violates federalism principles and the Appropriation Clause and resembles rules previously repealed for being burdensome and duplicative.
State of Montana Office of Attorney General, Attorney General Knudsen Fights Biden Administration Rule Requiring States to Reach Net-Zero Highway Emissions
October 10, 2022 | California Attorney General Guides Local Jurisdictions on Mitigating Wildfire Risks in New Development Projects
California’s attorney general issued guidance to local jurisdictions on best practices to disclose, analyze, and mitigate wildfire risks in compliance with the California Environmental Quality Act (CEQA) and to encourage local jurisdictions to think proactively about reducing wildfire risks while accommodating future housing and development needs.
The wildfire-risk guidance discusses several variables, including (1) Project Density (how project density influences how likely a fire is to start or spread and how likely a development and its occupants are to be endangered by fire); (2) Project Location in the Landscape (how project placement interacts with topography, fuel, climatic conditions, and fire weather to influence fire risk); and (3) Water Supply and Infrastructure (whether there are adequate water supplies and infrastructure, including the potential loss of water pressure and power, to address firefighting needs within the project site). Those variables should be considered when analyzing a development project’s impact on wildfire risk.
The guidance also strongly encourages local jurisdictions to engage in evacuation modeling and planning when analyzing how new projects may impact the evacuation efforts of project occupants and their neighbors and whether emergency responders could simultaneously access the area to fight wildfire – especially for projects located in high-wildfire-risk areas with an increased risk of ignition and evacuation impacts. Further, the guidance offers several practical measures to help jurisdictions comply with CEQA’s requirement to adopt all feasible mitigation measures, including installing undergrounding power lines, placing projects close to emergency services, and enforcing parking limitations to ensure access roads are not clogged during an emergency.
State of California Office of Attorney General, Best Practices for Analyzing and Mitigating Wildfire Impacts of Development Projects Under the California Environmental Quality Act