www.alston.com ESG Sustainability Spotlight Q3 | 2025
Q3 | 2025 3 2 SEPTEMBER Eighth Circuit Pauses Litigation While SEC Considers Climate Disclosure Rules September 12, 2025 | State of Iowa v. SEC, No. 24-1522 (8th Cir.). The Eighth Circuit Court of Appeals indefinitely paused litigation challenging Biden-era SEC climate reporting requirements until the SEC “reconsiders the challenged [rules] by notice-and-comment rulemaking or renews its defense” of the rules. The regulations, adopted in 2024, require publicly traded companies to disclose their GHG emissions and report how climate change may impact their businesses. The regulations faced immediate legal challenges from various industry groups and states. In March, the SEC announced that it would no longer defend the rules in court, and the Eighth Circuit then gave the SEC 90 days to decide whether it would rescind the rules. In July, the SEC informed the court that “the outcome of the litigation and the reasoning of the Court will bear heavily on the Commission’s next steps with the rules” and requested that the court issue a decision on the fully briefed case before the SEC takes any regulatory action. The court declined to do so, and in its September 12, 2025 order staying the case, stated that “it is the agency’s responsibility to determine whether [its rules] will be rescinded, repealed, modified, or defended in litigation.” appeal. While the future remains unclear, we stand ready to assist our clients in navigating these developments. Despite a widespread federal anti-ESG movement, state attorneys general continue to speak up, submitting significant comment letters opposing repeals of protections of Alaska’s natural resources and greenhouse gas (GHG) emission standards, and asking for substantiation of net-zero claims. Other attorneys general, on the other end of the spectrum, have asked the Trump Administration to reject the European Union’s Corporate Sustainability Reporting Directive (CSRD) and to protect U.S.- based companies from ESG- and DEI-related requirements. Many companies have temporary reprieves because the EU delayed CSRD reporting for the second and third waves of companies. While litigation has continued in the ESG space, there are fewer notable cases this quarter 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 Paeffgen, 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 With the SEC’s climate disclosure rules indefinitely stayed, focus has been on California’s climate disclosure requirements. In the third quarter, the California Air Resources Board (CARB) released further disclosure guidance—with many questions left unaddressed—and delayed rulemaking. Legal challenges continue, and on November 18 the Ninth Circuit granted a motion for injunction pending appeal in part, enjoining enforcement of SB 261, the California law requiring climaterelated financial risk disclosure reporting by January 1, 2026. The Ninth Circuit declined to similarly enjoin SB 253 (the California law requiring disclosure of Scopes 1, 2, and 3 emissions) pending Navigating the ESG Landscape: Risks, Opportunities, and Strategic Insights SEC Guidance & Enforcement AUGUST Green Fintech Co-Founder Pleads Guilty to Defrauding Investors August 21, 2025 | Securities and Exchange Commission v. Joseph Neal Sanberg, No. 8:25-cv-01848 (C.D. Cal.). Joseph Sanberg, co-founder of Aspiration Partners, pleaded guilty to two counts of wire fraud stemming from allegations that he fabricated asset and revenue figures to mislead investors and lenders. Aspiration was founded as a sustainability-focused banking firm that allegedly ensured investments were “c free” and did not fund projects in the oil or gas industry. According to prosecutors, Sanberg and others at Aspiration obtained loans from investors by pledging Aspiration stock and forging bank statements for a co-signor who would backstop the loans in the event of a default. Sanberg also inflated Aspiration’s revenue by recruiting “straw” customers to pay tens of thousands of dollars per month for tree planting services to conceal the fact that the payments were from Sanberg himself. Sanberg purportedly used these tactics to portray Aspiration as having $250 million in cash on hand, when it in fact had around $1 million.
Q3 | 2025 5 4 State Attorney General Actions SEPTEMBER Attorneys General Press Technology Companies for Answers on Renewable Energy September 24, 2025 Several attorneys general issued a letter to Amazon, Microsoft, Meta, and Google, urging the companies to explain their claims about their renewable energy practices and their net-zero emissions strategies. The attorneys general assert that their request for more information is designed to protect American citizens’ access to reliable and renewable energy resources. Attorneys General Press Trump to Reject EU’s ESG Reporting Directives September 23, 2025 Several attorneys general issued a letter to President Trump requesting that his Administration reject the European Union’s Corporate Sustainability Reporting Directive (CSRD), which directs certain business behaviors of companies that operate in the EU, including U.S.-based companies. The attorneys general target the CSRD and the Corporate Sustainability Due Diligence Directive (CSDDD), which together would require companies that operate in the EU to report information on their sustainability strategies, impacts, risks, opportunities, products and services, incentive programs, and business relationships, including relevant information on direct and indirect business relationships throughout the value chain. The CSRD would also require regulated companies to submit mandatory assurance obligations for the reported information; while the CSDDD would codify and incorporate ESG and DEI into the companies’ business, evaluation, and reporting practices. The attorneys general contend that the EU directives’ attempt to regulate U.S.-based companies with ESG- and DEIrelated principles runs counter to the Trump Administration’s work to dismantle the same efforts. AUGUST Attorneys General Urge the U.S. EPA to Abandon Its Proposal to Repeal All Greenhouse Gas Emissions Standards August 8, 2025 | Comments on the U.S. Environmental Protection Agency’s Proposed Repeal of Greenhouse Gas Emission Standards for Fossil Fuel-Fired Electric Generating Units Shareholder Litigation AUGUST Airbnb Moves to Dismiss Shareholder Suit over Proxy Materials August 12, 2025 | The Heritage Foundation v. Airbnb Inc., No. 1:25-cv-00676 (D. Del.). Airbnb asked a federal court in Delaware to dismiss a shareholder suit alleging that the company allowed more liberal-leaning proposals to be included in its 2025 proxy materials while excluding proposals from politically conservative groups. The plaintiffs alleged Airbnb claimed it did not receive their proposals in the mail despite proof of delivery. The proposals that Airbnb allegedly failed to include asked the company to analyze how it oversees the risks of political divestment, as well as the risks of restricting services to users based on political views. Airbnb argued that the plaintiffs had not pleaded any facts showing that the proposals ever made it beyond the company’s mailroom, “much less, any facts supporting [the] claim that the Individual Defendants ‘ignored’ the proposals in violation of [SEC] Rule 14a-8.”The company further argued that the plaintiffs had not alleged any specific misstatement or omission to support their securities fraud claim and that the plaintiffs failed to identify the individuals responsible for excluding the proposals JULY Court Dismisses Suit over Green Investment Claims July 15, 2025 | Carper v. The Metals Co. Inc., No. 1:21-cv-05991 (E.D.N.Y.). A federal judge dismissed a shareholder suit accusing The Metals Co. of understating the environmental risks of seafloor mining. Investors alleged that thec and minerals exploration company misled investors by omission when the company said that certain seafloor mining equipment would reduce the waste and the “ESG footprint” of metals. The court found that the challenged statements were not misleading because the plaintiffs “identif[ied] no specific omitted facts,” and further found that The Metals Co. had previously disclosed the environmental risks of its products. The court also noted that the defendant’s alleged “need to raise additional capital to finance operations” constituted only a generalized motive and fell short of the required standard to plead a defendant’s state of mind. Several attorneys general issued a comment letter to the U.S. EPA opposing the agency’s proposal to repeal greenhouse gas (GHG) emissions standards for fossil-fuel-fired power plants. The attorneys general arguments against the EPA’s proposed repeal of all GHG emission standards include that the best reading of the underlying statute calls for regulation by source category (which directly contradicts the EPA’s current reading to justify the repeal) and that the EPA’s finding that power plants don’t significantly contribute to GHG emissions is unlawful. The attorneys general also contend that the EPA’s proposed repeal is arbitrary and capricious and will not benefit the American people. The attorneys general ultimately contend that the proposed repeal would work against storied efforts to address climate change and reduce environmental harm. Attorneys General Oppose Trump Administration’s Proposal to Rescind Biden-Era Oil and Gas Regulations in Alaska August 4, 2025 | Comments on the Proposed Rescission of the Management and Protection of the National Petroleum Reserve in Alaska Regulations Several attorneys general issued a comment letter to the federal Bureau of Land Management (BLM) opposing the agency’s proposal to rescind the 2024 Management and Protection Regulations of the National Petroleum Reserve– Alaska, a Biden-era regulation that was implemented to protect Alaska’s natural resources and to mitigate reasonably foreseeable, adverse effects of proposed oil and gas activities in Alaska. The attorneys general assert that the 2024 rule is critical to protecting Alaska’s environment and contend that the rule’s removal would exacerbate climate change consequences throughout the state and beyond. The attorneys general comment letter ultimately urges the BLM to reverse its proposal to rescind the important 2024 rule.
Q3 | 2025 7 6 California Climate Disclosure Topics Litigation Tracking SEPTEMBER Portland’s Limits on New or Expanded Bulk Fossil Fuel Terminals Stands September 2, 2025 | State of Montana v. City of Portland, No. 3:23-cv-00219 (D. Or.). The District of Oregon dismissed with prejudice a dormant Commerce Clause challenge to the City of Portland’s amendments to its land use code that imposed limits on the construction of new or expanded bulk fossil fuel terminals. The court found that the plaintiffs did not adequately allege that the amendments were driven by economic protectionism or otherwise discriminate against interstate commerce on their face. AUGUST Nonprofits Challenge Secret Climate Advisory Group and Rollback of EPA Climate Protections August 12, 2025 | Environmental Defense Fund Inc. v. Wright, No. 1:25-cv-12249 (D. Mass.). An environmental nonprofit and a nonprofit science advocacy organization filed suit against the Department of Energy (DOE), Environmental Protection Agency (EPA), and Climate Working Group, alleging violations of the Federal Advisory Committee Act (FACA) and the Administrative Procedure Act (APA). The complaint alleges that the defendants unlawfully established and used the Climate Working Group—a secret panel of “handpicked” climate science skeptics—to justify rescinding the EPA’s 2009 Endangerment Finding and vehicle emission standards without the transparency, public notice, balanced membership, or public disclosure of records required under federal law. The plaintiffs bring four claims under the APA, as well as for ultra vires actions and mandamus, and claim injury from the lack of access to information and exclusion from the advisory process. The plaintiffs seek declaratory and injunctive orders to enjoin the Climate Working Group, vacate its actions, prevent the DOE and EPA from relying on the Climate Working Group’s report, compel disclosure of all related records, and ensure compliance with FACA’s requirements for advisory committees. Court Denies Motion to Dismiss D.C. Avocado Suit, Greenlights Jurisdictional Discovery August 11, 2025 | Organic Consumers Association v. Calavo Growers Inc., No. 2024-CAB-006328 (D.C. Super. Ct.). The Superior Court of the District of Columbia denied without prejudice a defendant avocado distributor’s motion to dismiss a deceptive marketing consumer protection lawsuit brought by a nonprofit advocacy group under the D.C. Consumer Protection Procedures Act. The plaintiff alleged that although Calavo represents to consumers that its products are sustainable and responsibly grown, the avocados are sourced from deforested land in Mexico, which exacerbates water scarcity, habitat and biodiversity loss, and climate change. Calavo argued for dismissal based on lack of personal jurisdiction and standing, claiming that it does not sell its products or publish any advertising in D.C. The court found that the plaintiff had standing as a public interest organization representing D.C. consumers concerned about sustainable avocados, and although the court was not “currently persuaded that it has personal jurisdiction over the Defendant,” the court exercised its discretion and granted the plaintiff 60 days to conduct additional jurisdictional discovery. JULY D.C. Circuit Dismisses Slave Labor Class Action July 22, 2025 | Coubaly v. Cargill Incorporated, No. 22-7104 (D.C. Cir.). The plaintiffs filed a putative class action against seven cocoa importers, alleging that the importers violated the Trafficking Victims Protection Reauthorization Act. Specifically, they alleged that the defendant importers formed and control a cocoa supply chain harvested by enslaved individuals. On July 22, 2025, the D.C. Circuit affirmed the district court’s dismissal of the complaint. The court found that the plaintiffs did not plausibly allege a connection between the defendant importers and the farms where the plaintiffs worked. California Climate Disclosure Laws Survive First Amendment Challenge but are Partially Stayed Pending Appeal Chamber of Commerce v. CARB, No. 2:24-cv-00801 (C.D. Cal.). Chamber of Commerce v. Sanchez, No. 25-5327 (9th Cir.). On August 13, 2025, the Central District of California denied the Chamber of Commerce and business groups’ motion to enjoin California’s climate disclosure laws SB 253 and SB 261 on First Amendment grounds. The court found that the plaintiffs’ facial challenge to SB 253 was ripe because even though the California Air Resources Board (CARB) has not issued implementing regulations, “SB 253 is clear that covered companies will be required to report Scope 1, 2, and 3 emissions.”The court concluded that both laws regulate commercial speech and therefore lower levels of scrutiny, not strict scrutiny, applied. Under the lower levels of scrutiny, the court found that the plaintiffs failed to show a likelihood of success on the merits in their facial challenges to both laws based on California’s substantial government interests in providing investors with reliable information and in reducing emissions. However, the court suggested that if companies with no California investors had brought an as-applied challenge against SB 253, they may have been successful. The plaintiffs appealed to the Ninth Circuit and also moved the Ninth Circuit for an injunction pending the appeal, requesting relief by November 3, 2025. Following the plaintiffs’ emergency application to the U.S. Supreme Court for an injunction pending appeal in November, on November 18, the Ninth Circuit granted a motion for injunction pending appeal in part, enjoining enforcement of SB 261 pending appeal of the lower court’s previous denial of a preliminary injunction. The Ninth Circuit declined to similarly enjoin SB 253 pending appeal. A hearing on the merits of the district court’s denial of the preliminary injunction for SB 261 and SB 253 is scheduled for January 9, 2026. With enforcement of SB 261 now enjoined pending the Ninth Circuit’s decision on the district court’s denial of preliminary injunction, it is unlikely that the Ninth Circuit takes any further action before the January 9 hearing. The timing of a Ninth Circuit ruling on the underlying constitutionality of the two laws after the January 9 hearing is uncertain. CARB Public Workshop Provides Key Updates to SB 253 and SB 261 Rulemaking On August 21, 2025 and November 18, 2025, the California Air Resources Board (CARB) conducted virtual public workshops to provide guidance on SB 253 and SB 261 and to solicit public input. In response to feedback, CARB proposed revisions and refinements to its initial staff concepts for definitions of “revenue,” and “doing business in California” and proposed exemptions. In the November workshop, CARB proposed an August 10, 2026 deadline for both Scope 1 and Scope 2 reporting. CARB also presented draft frameworks for a fee regulation. Following the workshops, CARB posted and updated various guidance materials to help entities prepare for reporting, including a preliminary list of the entities it believes are subject to SB 253 and SB 261—which has been subject to much criticism—and a draft reporting template and accompanying guidance for Scope 1 and Scope 2 emissions. CARB continues to seek public input as it continues through to the initial rulemaking process that has been delayed into Q1 2026.
8 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 John Evan Laughter Associate, Atlanta +1 404 881 7354 johnevan.laughter@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 Paeffgen Partner, Washington, D.C. +1 202 239 3939 elise.paeffgen@alston.com Noah LeGrand Associate, Washington, D.C. +1 202 239 3017 noah.legrand@alston.com Samantha Van Winter Associate, Charlotte +1 704 444 1131 samantha.vanwinter@alston.com Authors
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