www.alston.com ESG Sustainability Spotlight Q1 | 2026
Q1 | 2026 3 2 FEBRUARY Proposed SEC Amendments to Form N‑PORT and Their Impact on ESG Funds February 18, 2026 | SEC Proposes Amendments to Reduce Burdens in Reporting of Fund Portfolio Holdings The Securities and Exchange Commission (SEC) proposed changes to Form N-PORT that are particularly consequential for ESG-focused funds. The changes would lengthen the filing deadline for Form N-PORT reports from 30 to 45 days following the end of each month, extend public disclosure of portfolio holdings from monthly to quarterly, and remove certain data points from the reporting framework, including disclosures tied to the “Names Rule,” which protects investors from misleading fund names. The SEC stated that these proposed revisions stem from a presidential memorandum directing agencies to reassess regulatory burdens, feedback from industry participants, and the SEC’s decision in April 2025 to postpone the effective and compliance dates of the 2024 amendments to Form N-PORT. The SEC observed that frequent public release of detailed portfolio holdings can enable third parties to reverse engineer a fund’s investment approach or predict its trading behavior, facilitating free riding on research efforts or frontrunning transactions. According to the SEC, these concerns have intensified as technological capabilities like artificial intelligence have made it easier to analyze and exploit disclosed data, especially for actively managed funds. The proposed removal of Names Rule reporting would eliminate the requirement for funds to identify whether each holding falls within the fund’s 80% investment basket. The SEC acknowledged that these disclosures could reveal sensitive selection criteria and expose funds to competitive harm. As a result, ESG funds may benefit from the proposed reduction in disclosures, which will better safeguard the confidentiality of the funds’ strategies. public signaling of a deregulatory and materiality-focused agenda, has strengthened. Notable events in the first quarter solidifying this sea change include Atkins’s testimony before the House Financial Services Committee confirming plans to review and potentially revise current disclosure rules and the SEC’s anticipated proposed rulemaking to “modernize” Rule 14a-8. While these developments have reduced the volume of ESGrelated proposals reaching proxy ballots, the practical effect has been a marked shift toward litigation: In about a handful of instances, shareholder proponents have begun filing suit directly against issuers to compel inclusion of excluded proposals. Companies also continue to face growing pressure from state attorneys general and private litigants addressing greenwashing and ESG-related disclosure accuracy. These developments underscore that ESG-related risk has not abated—it has, instead, largely shifted toward decentralized enforcement and private litigation, and increasingly toward the courts as the primary arena for resolving disputes over the scope and process of ESG-related shareholder engagement. Alston & Bird’s ESG Advisory Team At Alston & Bird, our ESG Advisory Team provides strategic guidance to companies navigating the ESG landscape. Our services include: Understanding ESG Dynamics. We help companies grasp the nuances of ESG and tailor their approaches accordingly. Regulatory Insights. Our team stays abreast of ESG-related regulations worldwide, ensuring clients remain compliant. Shareholder Engagement. Crafting effective responses to shareholder proposals requires expertise. We guide companies in this critical area. Risk Mitigation. Minimizing litigation and enforcement risk is crucial. Our strategies and materials help companies proactively address potential legal challenges. ESG Tracker and Sustainability Spotlight Our ESG Tracker and this publication offer valuable insights into federal and state enforcement actions, litigation trends, and shareholder proposals. They serve as a resource for companies seeking to stay informed and make up-to-date decisions on all matters related to ESG. Dave Brown, Kevin Minoli, Elise Bowen, Cara Peterman, Jason Outlaw Environmental, Social & Governance (ESG) Team In today’s business world, environmental, social, and governance (ESG) issues have taken center stage, and companies, both public and private, are increasingly recognizing the significance of ESG responsibility. Today’s executives, managers, and stakeholders find themselves navigating a complex landscape filled with risks and opportunities. The ESG Imperative ESG encompasses a broad spectrum of factors that impact a company’s long-term sustainability and performance. Let’s break down what each component entails: Environmental (E): This dimension focuses on a company’s impact on the environment. It includes considerations such as carbon emissions, resource usage, waste management, and climate change resilience. Social (S): The social aspect encompasses how a company interacts with its employees, customers, communities, and other stakeholders, as well as the non-environmental impacts of its supply chain. Topics like diversity and inclusion, labor practices, human rights, and community engagement fall under this category. Governance (G): Governance refers to the systems and processes that govern a company’s decision-making. It involves board composition, executive compensation, transparency, and adherence to ethical standards. Welcome to the ESG Sustainability Spotlight The ESG landscape continued to fragment in the first quarter of 2026, marked by a further regulatory pullback at the federal level, alongside active (and often divergent) state, shareholder, and private litigation initiatives. A centerpiece of this continued shift has been the ongoing effects of the Securities and Exchange Commission (SEC) Division of Corporation Finance’s Statement Regarding [Its] Role in the Exchange Act Rule 14a-8 Process for the [2026] Proxy Season, in which the division announced it would largely decline to issue no-action responses on proxy exclusions of shareholder proposals, other than exclusions of proposals that are not a proper subject for action under applicable state law. This announcement has materially reshaped the shareholder proposal landscape through the first quarter of 2026. That posture, combined with SEC Chair Paul Atkins’s continued Navigating the ESG Landscape: Risks, Opportunities, and Strategic Insights SEC Guidance & Enforcement JANUARY SEC Dismisses Carbon Market Company’s Challenge to FINRA Processing Delays January 2, 2026 | In the Matter of the Application of Entrex Carbon Market Inc. (f/k/a UHF Logistics Group Inc.) Shareholders, Release No. 104535. The SEC dismissed a shareholder appeal arising from FINRA’s handling of Entrex Carbon Market’s request to announce a reverse stock split and change its corporate name and trading symbol. The shareholders alleged that FINRA took 15 months to act on the request and sought the SEC’s intervention. The decision underscores the narrow scope of relief available in SEC review proceedings challenging the conduct of selfregulatory organizations, even when procedural delays are alleged to have meaningful consequences for smaller or climate-oriented issuers. In their application, the shareholders asked the SEC to compel FINRA to act on the company-related requests, refund the processing fee paid by Entrex, direct FINRA to amend Rule 6490, and provide “interpretive guidance” on FINRA’s handling of company-related actions. However, by the time the appeal was under consideration, FINRA had approved and processed the requested actions. The SEC determined that Exchange Act Section 19(d) did not provide a statutory basis to grant the relief sought. Because FINRA had completed the relevant processing, there was no operative action left for the SEC to set aside or remedy under Section 19(f). The SEC further explained that Section 19(d) review does not permit the SEC to order fee disgorgement, mandate rulemaking changes by FINRA, or issue guidance on FINRA’s internal workflows. Finally, the SEC noted that its dismissal addressed only the procedural limits of reviews under Section 19(d). The SEC emphasized that the decision did not constrain its broader supervisory and enforcement authority over FINRA under the Exchange Act.
Q1 | 2026 5 4 Shareholder Litigation MARCH Second Circuit Affirms Dismissal of Securities Claims Against Solar Panel Manufacturer March 24, 2026 | Plymouth County Retirement Association v. Array Technologies Inc., No. 23-1122 (2nd Cir.). The Second Circuit affirmed the dismissal of securities fraud claims brought by investors against Array Technologies Inc., a manufacturer of solar panel tracking systems, as well as its officers, directors, former shareholders, and underwriters. The decision highlights the difficulty plaintiffs face in pleading securities fraud claims against renewable energy companies operating in cost-sensitive markets, particularly those where fluctuating input prices affect profitability. The investors alleged that Array violated Sections 10(b) and 20(a) of the Exchange Act and Sections 11, 12(a)(2), and 15 of the Securities Act by misleading investors about the impact of rising steel and freight costs on its business. According to the investors, Array’s disclosures treated rising costs as a contingent possibility, even though higher steel prices were already affecting the company and could not always be offset through customer pricing. Both the district court and the Second Circuit rejected this argument, concluding that Array’s disclosures adequately alerted investors to its exposure to raw-material cost fluctuations. The Second Circuit also rejected claims based on statements made by Array’s then-CFO during a March 2021 earnings call, which when considered in context, the court found did not amount to an absolute assurance that cost passthrough would always be possible. Finally, the Second Circuit agreed with the district court’s refusal to grant leave to amend, determining that the proposed amendments would not address the core shortcomings in the investors’ allegations. JANUARY California Federal Court Greenlights EV Securities Fraud Action January 22, 2026 | Indiana Public Retirement System v. Rivian Automotive Inc., No. 2:24-cv-04566 (C.D. Cal.). The Central District of California refused to dismiss securities fraud claims against Rivian Automotive Inc., allowing a class action to proceed based on allegations that the company overstated demand and the reliability of its future production. Ninth Circuit Revives IPO Securities Claims Tied to COVID-Era Customer Churn January 7, 2026 | In re ON24 Inc. Securities Litigation, No. 24-2204 (9th Cir.). The Ninth Circuit partially revived a securities class action challenging disclosures in ON24’s IPO materials. An ESGfocused fund alleged that the company’s registration statement failed to disclose that customer churn and subscription downselling had already begun as pandemicdriven customers signaled they would not renew or would reduce short-term commitments. The circuit court agreed with the district court that ON24’s optimistic statements about its long-term growth prospects were non-actionable forward-looking opinions. However, it reinstated Section 11 claims based on other disclosures describing ON24’s customer base and warning that renewals or growth rates “may” decline. The court found that, at the pleading stage, the plaintiffs plausibly alleged that ON24 knew churn and downselling had begun and that pandemicdriven customer behavior was already weighing on future performance, making those disclosures potentially misleading. The Ninth Circuit also reinstated the plaintiffs’ Regulation S-K Item 303 claim, finding sufficient allegations that ON24 failed to disclose known adverse trends. The complaint alleged that management tracked churn risk in internal systems and discussed those metrics internally before the IPO, supporting an inference that the risks were known rather than merely hypothetical. Because the Section 11 claims were adequately pleaded, the court likewise reinstated the related Section 15 control-person claims against ON24’s officers and directors. The shareholders challenged statements suggesting the company was on a path to gross-margin profitability by 2024. The plaintiffs alleged that Rivian’s optimistic statements relied heavily on a preorder backlog that was an unreliable indicator of true demand because it consisted of fully refundable deposits that imposed no purchase obligation on customers. According to the complaint, Rivian also faced mounting macroeconomic, supply chain, and pricing pressures that were already evident to the company when issuing its forecasts. The plaintiffs further alleged that Rivian ceased publicly reporting backlog data while continuing to reassure investors about demand trends. Rivian sought judgment on the pleadings, arguing that the Ninth Circuit’s 2025 decision in Sneed v. Talphera Inc. required dismissal because its statements, viewed in context alongside extensive risk disclosures, could not have misled a reasonable investor. The court disagreed, concluding that Sneed, which addressed an allegedly misleading pharmaceutical marketing slogan, was factually distinct and did not alter securities-fraud pleading standards.
Q1 | 2026 7 6 Title Litigation Tracking State Attorney General Actions FEBRUARY State Attorney General Warning Letters Target ESG-Driven Plastics Collaborations February 10, 2026 A coalition of 10 state attorneys general, led by Florida Attorney General James Uthmeier, sent formal warning letters to companies participating in plastics‑ and packaging‑focused ESG initiatives. The letters warned that the companies’ coordinated commitments to reduce plastic use could be treated as anticompetitive conduct. The attorneys general asserted that these ESG-driven policies may function as agreements among competitors that restrict output, raise prices, or mislead consumers. They stated that the conduct could violate state and federal antitrust and consumer protection laws. The letters instructed recipients to preserve documents and to anticipate possible future investigations. They also required companies to submit written explanations identifying the legal basis for participating in plastics advocacy organizations. JANUARY State Attorneys General Challenge ESG Coordination by Climate Group January 21, 2026 A coalition of six state attorney generals, led by Florida Attorney General James Uthmeier, issued a warning letter to climate nonprofit Ceres alleging that its coordinated ESG advocacy may violate state and federal antitrust and consumer protection laws. The attorneys general argue that Ceres pressures corporations and financial institutions—through shareholder engagement, investor campaigns, and governance actions—to shift capital away from certain industries, particularly oil and gas. They contend that this coordinated activity, undertaken in pursuit of net-zero goals, may constitute unlawful collusion. They also claim that companies that do not comply with Ceres’s agenda risk facing claims of “greenwashing” that could mislead potential customers. MARCH California Sued over Vehicle Emission Regulations March 12, 2026 | United States of America v. California Air Resources Board, No. 2:26-at-00450 (E.D. Cal.). The U.S. Justice and Transportation departments filed a complaint for declaratory and injunctive relief against the California Air Resources Board (CARB) for allegedly adopting and enforcing regulations for fuel economy standards for lightduty vehicles in violation of the Energy Policy Conservation Act and the U.S. Constitution. The plaintiffs assert that CARB’s CO2 standards for light-duty and zero-emissions vehicles are preempted under 49 U.S.C. § 32919(a) because they relate to fuel economy standards and therefore should be declared unlawful and unenforceable, and California should be permanently enjoined from enforcing them. FEBRUARY Plaintiffs Receive Attorneys’ Fees… and Nothing Else February 11, 2026 | Spence v. American Airlines Inc., No. 4:23-cv-00552 (N.D. Tex.). A federal judge in Texas ruled that the plaintiffs were entitled to $4.6 million in attorneys’ fees in their suit arguing that American Airlines improperly allowed ESG factors to guide its employee retirement fund investment strategy—even though the judge did not award the plaintiffs any actual monetary damages. The judge determined in an early ruling that the best way for American Airlines to address its breach of fiduciary duty to its employees was to make changes to the plan’s management, rather than to award money damages to the individual class members. The judge awarded attorneys’ fees, however, given the weight of the duty of loyalty the airline breached and as an incentive to ensure future compliance with the federal benefits laws. Texas SB 13 Struck Down as Unconstitutionally Vague February 4, 2026 | American Sustainable Business Council v. Hegar, No. 1:24-cv-01010 (W.D. Tex.). A federal judge struck down a Texas law restricting public entities from investing with financial firms and businesses that “boycott” energy companies and the fossil fuel industry. Calling the law both “overbroad and unconstitutionally vague” in violation of the First and Fourteenth Amendments, the judge granted a motion for partial summary judgment for the plaintiff, a sustainability-focused business group, and prohibited the state from enforcing Senate Bill 13. JANUARY Washington Dismisses NOAA Suit January 20, 2026 | State of Washington v. U.S. Department of Commerce, No. 2:25-cv-01507 (W.D. Wash.). The state of Washington voluntarily dismissed its lawsuit against the U.S. Department of Commerce in which it sought to restore $9.3 million in climate-related funding agreements between Washington and the department’s National Oceanic and Atmospheric Administration in 2023 and 2024 that the Trump Administration had terminated. The dismissal comes after a federal judge in the fall granted a preliminary injunction and found that the Trump Administration’s decision to terminate the funding agreements was likely arbitrary and capricious, unconstitutional, and in violation of federal regulations.
Q1 | 2026 9 8 Title Dave Brown Partner Washington, D.C. +1 202 239 3463 dave.brown@alston.com Cara Peterman Partner Atlanta, New York ATL +1 404 881 7176 NYC +1 212 905 9176 cara.peterman@alston.com Meera Basavappa Associate New York +1 212 905 9359 meera.basavappa@alston.com Jason Outlaw Partner Atlanta +1 404 881 7941 jason.outlaw@alston.com Hillary Sanborn Senior Associate Washington, D.C. +1 202 239 3640 hillary.sanborn@alston.com Andrea Galvez Associate Atlanta +1 404 881 7649 andrea.galvez@alston.com Kevin Minoli Partner Washington, D.C. +1 202 239 3760 kevin.minoli@alston.com Megan Ault Senior Associate San Francisco +1 415 243 1056 megan.ault@alston.com Madeleine Juszynski Davidson Associate Atlanta +1 404 881 7173 madeleine.davidson@alston.com Elise Bowen Partner Washington, D.C. +1 202 239 3939 elise.bowen@alston.com Noah LeGrand Associate Washington, D.C. +1 202 239 3017 noah.legrand@alston.com Hope Kagan Associate Atlanta +1 404 881 7370 hope.kagan@alston.com Armin Sirossian Associate San Francisco +1 415 243 1073 armin.sirossian@alston.com John Zarrilli Associate Atlanta +1 404 881 7664 john.zarrilli@alston.com California Climate Disclosure Topics Authors CARB Seeks Comment on GHG Emissions Reporting On March 23, 2026, the California Air Resources Board (CARB) hosted a public workshop to propose initial concepts for a later rulemaking on SB 253 greenhouse gas (GHG) emissions reporting. For Scopes 1, 2, and 3 emissions reporting in 2027 and beyond, CARB proposed initial concepts of organizational boundaries, GHG accounting methods, emission factors, options for Scope 3 emissions reporting, assurances, and CARB’s economic analysis. CARB indicated that in the coming months it would provide additional guidance for initial reporting due August 10, 2026. CARB also solicited public comment on whether any items from the initial proposed regulation approved by the board in February 2026 should be reconsidered for subsequent reporting years. The public comment period ran through April 13, 2026. CARB Approves Initial Regulations for SB 253 and SB 261 On February 26, 2026, CARB hosted a public hearing to consider the proposed initial regulations for SB 253 and SB 261. After CARB staff presented its proposed regulations, the board heard public comments from the state senator who sponsored SB 253 and other members of industry and the public. Once CARB staff responded to the key issues raised in public comments, the record was closed. CARB staff then addressed questions from the board, which focused on many of the issues raised in public comments. Overall, CARB’s responses suggested an unwillingness to consider an extension of SB 253’s August 10, 2026 reporting deadline or pause rulemaking pending the Ninth Circuit appeal. Additionally, one notable topic of discussion concerned the proposed exemption of insurance companies from SB 253 reporting. The state senator who sponsored SB 253 argued that an exemption is contrary to the legislature’s intent and exceeds CARB’s authority, while various commenters from the insurance industry and CARB staff defended the proposed exemption as a way to avoid duplicative reporting. At the end of the hearing, CARB voted to approve the proposed regulations for adoption, instructing CARB staff to coordinate with the California Department of Insurance (CDI) to evaluate CDI emissions reporting requirements. Ninth Circuit Ruling on SB 253 and SB 261 Could Have a Narrow Scope On January 9, 2026, the Ninth Circuit heard oral argument in the U.S. Chamber of Commerce’s facial constitutional challenge to California’s climate disclosure laws SB 253 and SB 261. The issue on appeal is the Central District of California’s denial of a preliminary injunction against both laws on First Amendment grounds. The court questioned counsel for both parties throughout their arguments. For example, the court asked multiple questions about Scope 3 emissions disclosures, including a question to California whether, if the court was concerned about Scope 3 emissions disclosure requirements, the case should be sent back to the district court for a severability analysis. Based on the questions posed, the Ninth Circuit’s ultimate ruling on SB 253 could depend on the specific disclosures—for example, upholding the disclosures of Scopes 1 and 2 emissions, but preliminarily enjoining the disclosure of Scope 3 emissions. While the Ninth Circuit’s decision is pending, the injunction enjoining enforcement of SB 261 pending appeal remains in effect. Following the Ninth Circuit’s decision, the case would return to the district court, where it would proceed on the merits.
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