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Economy and Society: December 3, 2025
In this week’s edition of Economy and Society:
- SEC limits no-action responses for proxy season
- Europe moves to simplify sustainable finance rules
- Ninth Circuit halts California climate-disclosure rule
- Florida files lawsuit against proxy advisors
- Study shows drop in fund manager support for ESG proposals
In Washington, D.C., and around the world
SEC limits no-action responses for proxy season
What’s the story?
The Securities and Exchange Commission (SEC) announced on Nov. 17 that it will not respond to most no-action requests, which companies file when they want SEC staff to confirm they will not recommend enforcement if a shareholder proposal is excluded from the proxy, during the 2025–26 season. The Division of Corporation Finance said it will offer views only on exclusion requests related to a company’s jurisdiction under state law. Companies must determine on their own whether a proposal is excludable under Rule 14a-8 and still must provide the required 80-day notice before filing proxy materials.
Why does it matter?
The move would shift responsibility for exclusion decisions onto companies rather than the SEC, leaving investors and fund managers without the staff guidance they have typically relied on. It also connects to broader debates over environmental, social, and governance (ESG) issues in corporate voting, since many shareholder submissions involve environmental and social proposals. Without informal SEC guidance, companies and investors must evaluate exclusion and reporting requirements on their own, relying solely on statute, rules, and existing staff materials from prior years.
What’s the background?
Rule 14a-8 allows shareholders to submit proposals for inclusion in company proxy statements, and companies traditionally request informal SEC no-action letters when they want to exclude a submission. These letters signal whether staff would recommend enforcement. The SEC said its change for the 2025–26 season stems from resource constraints after a prolonged shutdown and from the existing guidance available to companies.
Europe moves to simplify sustainable finance rules
What’s the story?
The European Commission released proposed updates to the Sustainable Finance Disclosure Regulation (SFDR) on Nov. 20, aiming to simplify sustainability reporting and make it easier for investors to understand financial products. The proposal introduces three new categories for funds that use ESG strategies: Sustainable, Transition, and ESG Basics. The Commission said the changes respond to concerns that current SFDR disclosures are too long and complex, and that existing classifications have been misused as de facto labels, including:
- Article 8 funds: products that promote environmental or social characteristics
- Article 9 funds: products with a sustainable investment objective
Why does it matter?
The proposal updates SFDR by introducing a more standardized reporting structure and reducing certain requirements for asset managers and pension providers. It also establishes new product categories to support investor comparisons. The Commission said the updated framework simplifies disclosures, responds to greenwashing concerns, and improves the consistency of information for sustainability-related funds.
What’s the background?
SFDR, in place since 2021, sets rules for how financial market participants disclose sustainability risks, effects, and product-level information. The Commission launched a comprehensive review in 2023 that found the existing disclosures overly complex and susceptible to misinterpretation. The new proposal replaces Article 8 and Article 9 distinctions with a category-based structure and reduces entity-level and product-level reporting requirements.
In the states
Ninth Circuit halts California climate-disclosure rule
What’s the story?
The U.S. Court of Appeals for the Ninth Circuit issued an order on Nov. 18 temporarily blocking enforcement of California’s climate-risk disclosure law, SB 261. The statute requires companies with more than $500 million in annual revenue to report climate-related financial risks starting Jan. 1, 2026. The court granted the request after the U.S. Chamber of Commerce and several business groups sought emergency relief while the broader appeal proceeds next year.
The decision did not extend to California’s emissions-reporting statute, SB 253. That law remains scheduled to take effect Jun. 30, 2026, for Scope 1 and Scope 2 emissions, which cover direct emissions and emissions from purchased electricity, steam, heating, or cooling. Scope 3 reporting—covering supply-chain and customer-related emissions—is set to begin in 2027. The court did not provide additional reasoning in its one-page order.
Why does it matter?
The ruling alters compliance expectations for large companies preparing for California’s climate-reporting framework. Firms subject to SB 261 gain temporary relief from climate-risk disclosures, while SB 253’s emissions-reporting schedule remains intact. The decision also affects national debates over climate-related reporting standards, as companies face differing obligations depending on litigation outcomes across states and federal courts.
For companies operating in California, the pause creates a split regulatory pathway:
- SB 261 paused: climate-risk disclosures delayed.
- SB 253 moving forward: emissions reporting remains mandatory on current timelines.
The change adds uncertainty to planning efforts, especially as California prepares implementation rules and companies assess operational, legal, and supply-chain impacts.
What’s the background?
SB 253 and SB 261 were adopted in October 2023 as part of California’s Climate Accountability Package. SB 253 requires large companies doing business in the state to disclose Scopes 1 and 2 emissions in 2026 and Scope 3 emissions starting in 2027. SB 261 mandates disclosure of climate-related financial risks and mitigation strategies. In October, California regulators identified more than 4,000 companies that may fall under these laws.
Business groups—including the U.S. Chamber of Commerce, the California Chamber of Commerce, the American Farm Bureau Federation, and several regional federations—challenged both statutes. A federal district court first denied their request for a preliminary injunction, allowing both laws to move forward. After the Ninth Circuit also declined to halt the laws, the groups submitted an emergency application to the U.S. Supreme Court requesting a stay of both SB 253 and SB 261. The Ninth Circuit ultimately paused only SB 261 while leaving SB 253 in effect as the appeal proceeds.
Florida files lawsuit against proxy advisors
What’s the story?
Florida Attorney General James Uthmeier (R) filed a lawsuit on Nov. 20 against Institutional Shareholder Services (ISS) and Glass Lewis, alleging violations of state consumer protection and antitrust laws. The complaint, filed in the 14th Judicial Circuit, claims the firms misled investors and used their market position to shape proxy voting toward environmental, social, and governance considerations. The suit follows ongoing federal inquiries into the same firms and coincides with broader scrutiny of how proxy voting influences corporate governance and retirement-plan decisions.
Why does it matter?
The action increases legal and regulatory pressure on major proxy advisors and signals growing state involvement in disputes over environmental and social issues in corporate voting. The suit also raises questions for asset managers that rely on proxy guidance, as companies may face new compliance risk if recommendations are alleged to influence governance decisions in ways not aligned with state law. For investors, the case adds uncertainty to an already contested area of corporate oversight and proxy voting practices.
What’s the background?
Republican state attorneys general have increased scrutiny of the proxy-advisory industry. In March, Uthmeier launched an antitrust review focused on these firms’ concentrated influence over investor voting. In July, Missouri Attorney General Andrew Bailey (R) opened a separate investigation, arguing these firms put political considerations ahead of financial duties. In October, Glass Lewis announced it would end benchmark voting recommendations and move to customized guidance amid heightened oversight.
On Wall Street and in the private sector
Study shows drop in fund manager support for ESG proposals
What’s the story?
The Committee to Unleash Prosperity (CUP) published a report last week finding that many large asset managers sharply reduced their support for shareholder proposals tied to ESG or diversity, equity, and inclusion (DEI) goals in 2024. CUP analyzed how over 275 managers voted on 50 high-profile resolutions and reports that private-sector funds were 20% less likely to back those proposals than they were in 2023. Most of the top 40 funds increased their opposition rates, with the average grade rising from C- in 2022 to B in 2024.
Why does it matter?
The shift suggests major investors are reevaluating how they respond to ESG-related shareholder proposals, potentially reducing the influence of those agendas on corporate governance. For fund managers, the trend signals pressure—from scrutiny on fiduciary duty, clients, or political backlash—to prioritize financial performance over social or environmental agendas. For companies and markets, fewer ESG-backed votes may change the landscape for how firms respond to climate, diversity, or social-policy pressures through shareholder activism.
What’s the background?
U.S. policy and market conditions shifted throughout 2025 as ESG rules and investor behavior changed. Key developments included:
- Federal officials withdrew several ESG and climate-related rules, signaling a broader policy shift.
- The Trump administration signaled interest in altering ESG oversight, including potential limits on proxy-advisor authority.
- Investor demand for ESG products declined as U.S. funds recorded sustained outflows.
