ESG Update – January 23, 2025

23 January 2025

U.S.: President Trump Issues Sweeping Executive Orders Impacting Environmental and Social Matters

On January 20, 2025, Donald J. Trump was sworn in and took office as the 47th president of the United States. Since then, President Trump has signed more than 100 executive orders, rescinding previous Biden Administration orders and introducing significant changes in U.S. policy on climate; energy; and diversity, equity, and inclusion (“DEI”), among other areas. These include orders that:

  • declare a national energy emergency, allowing executive departments and agencies to facilitate the exploitation of “domestic energy resources, including, but not limited to, on Federal lands.” Among other things, the order provides for issuing emergency fuel waivers for gasoline and expediting the delivery of energy infrastructure;
  • eliminate the electric vehicle mandate and terminate the Green New Deal, immediately pausing all disbursements under the Inflation Reduction Act of 2022, including to electric vehicle infrastructure. The order, entitled “Unleashing American Energy,” also rescinds the Biden Administration’s efforts to advance environmental justice;
  • withdraw the United States from the Paris Agreement and any other agreements under the United Nations Framework Convention on Climate Change;
  • cease approvals of any new onshore and offshore wind projects, suspend the Lava Ridge Wind Project, and withdraw all areas on the outer continental shelf from offshore wind leasing;
  • combat “illegal private-sector DEI preferences, mandates, policies, programs, and activities” and also terminate all DEI programs in the federal government, which includes terminating all DEI and “environmental justice” offices and positions, among other steps. Another order provides for federal agencies to “take immediate steps to end Federal implementation of unlawful and radical DEI ideology”;
  • declare that it is the policy of the United States to “recognize two sexes, male and female,” enforce laws to “promote [the] reality” that “women are biologically female, and men are biologically male,” and recognize that women are biologically distinct from men.

We are continuing to review these executive orders and will share our views on how they may impact clients’ business activities in due course.

Links:
White House – Presidential Actions
White House – National Energy Emergency
White House – Unleashing American Energy
White House – Putting America First in International Environmental Agreements
White House – Temporary Withdrawal of All Areas on the Outer Continental Shelf from Offshore Wind Leasing and Review of the Federal Government’s Leasing and Permitting Practices for Wind Projects
White House – Ending Illegal Discrimination and Restoring Merit-Based Opportunity
White House – Ending Radical And Wasteful Government DEI Programs And Preferencing
White House – Initial Rescissions Of Harmful Executive Orders And Actions
White House – Defending Women From Gender Ideology Extremism And Restoring Biological Truth To The Federal Government
White House – Priorities


U.S.: Texas District Judge Finds a U.S. Airline’s ESG Investing Strategy Violated Federal Law

On January 10, 2025, Judge Reed O’Connor of the U.S. District Court for the Northern District of Texas held that American Airlines violated federal law by permitting an asset manager to make proxy votes on behalf of its employees’ 401(k) retirement plans based on ESG factors. The Judge held that American Airlines breached its fiduciary duty of loyalty under ERISA “by failing to keep American’s own corporate interests separate from their fiduciary responsibilities, resulting in impermissible cross-pollination of interests and influence on the management of the” retirement plan. Specifically, court proceedings revealed that American Airlines had failed to receive quarterly reports from its asset manager (also a major shareholder) on its proxy voting attestations, which expressly incorporated ESG considerations.

The class action was brought in August 2023 by Bryan Spence, an American Airlines pilot, on behalf of over 100,000 members of the retirement plan. Spence argued that American Airlines failed to discharge its fiduciary duties of prudence and loyalty by failing to monitor the proxy voting of its investment managers, and argued that its ESG goals created a corporate conflict of interest when combined with ESG considerations made by its investment managers.

Judge O’Connor held that American Airlines was impermissibly influenced by the interests of its asset manager, which also financed $400 million of American Airlines’ corporate debt and owns 5% of American Airlines’ stock, in violation of the duty of loyalty. However, the court found that American Airlines fulfilled its duty of prudence, as it had demonstrated a vigorous process for scrutinizing investment performance and monitoring proxy-voting activities, consistent with prevailing industry practice.

Link:
Judgment


U.S.: New York Passes Law to Charge Fossil Fuel Companies for Historic Emissions

On December 26, 2024, New York Governor Kathy Hochul signed into law the New York Climate Change Superfund Act (the “Act”). Following Vermont, New York became the second U.S. state to pass legislation requiring companies deemed to have contributed significantly to greenhouse gas emissions to contribute proportionally to the costs of infrastructure investments and projects needed for climate change adaptation.

The Act imposes “cost recovery demand” payments from entities deemed by the New York State Department of Environmental Conservation to be “responsible parties.” Responsible parties are entities or successors in interest that engaged in the trade or business of extracting fossil fuel or refining crude oil, between January 1, 2000 and December 31, 2018, and which the Department understands to be accountable for more than one billion metric tons of certain greenhouse gas emissions. In the aggregate, responsible parties are expected to pay approximately $3 billion per year into the fund, with a target of $75 billion by 2050 and the first payments due in 2026. Funds collected will be used for new or upgraded infrastructure needs; energy efficient cooling systems in public and private buildings, including schools and public housing; support for programs addressing climate-driven public health challenges; and responses to extreme weather.

Similar bills are progressing in Maryland, Massachusetts, California, and New Jersey.

Link:
Text of the Act


EU: EBA Publishes Final ESG Risk Guidelines

On January 9, 2025, the European Banking Authority (“EBA”) issued its final guidelines for financial institutions on the management of ESG risks.

The guidelines set out ESG risk management processes that financial institutions must have in place, including requirements regarding robust internal processes, regular risk assessments, and long-term transition planning aligned with the EU’s 2050 climate neutrality target. Specifically, the guidelines cover topics including: (i) the identification, measurement, management, and monitoring of ESG risks; (ii) criteria for assessing the short-, medium-, and long-term impact of ESG risks on the broader risk profile and solvency of financial institutions; and (iii) the content of transition plans, which must include specific timelines and quantifiable targets and milestones.

The EBA guidelines apply from January 11, 2026, except for institutions defined by the EU as “small and non-complex,” to which the guidelines apply at the latest from January 11, 2027.

Link:
Guidelines


EU: Platform on Sustainable Finance Proposes Changes to EU Taxonomy

On January 8, 2025, the EU Platform on Sustainable Finance (the “Platform”), an advisory body to the European Commission, launched a consultation on a draft report proposing amendments to the EU Taxonomy.

The draft report, based on feedback from the market, proposes several changes, including proposals to:

  • add new activities to the EU Taxonomy that can qualify as environmentally sustainable such as, for instance, provision of digital solutions or production of materials such as lithium, nickel and copper; and
  • revise the “technical screening criteria” included under the Climate Delegated Act. In particular, the Platform proposed simplifying the “Do No Significant Harm” criteria. These technical screening criteria set out the conditions that an economic activity must meet to qualify as environmentally sustainable, where that activity substantially contributes to either climate change mitigation or climate change adaptation. The proposed amendments aim to improve the usability of the EU Taxonomy by reducing the complexity of meeting the technical screening criteria, which would, in turn, reduce implementation costs and improve consistency.

The Platform invites stakeholders to comment on the draft report by February 5, 2025. In December 2024, the Platform published a proposal recommending substantial changes to the existing Sustainable Finance Disclosure Regulation regime (more on this here).

Link:
Press Release


This publication is for general information purposes only. It is not intended to provide, nor is it to be used as, a substitute for legal advice. In some jurisdictions it may be considered attorney advertising.