Sustainable Energy & Infrastructure Litigation Updates — July 2025

Federal & State Regulation

The Securities & Exchange Commission (SEC) recently made certain announcements that reflect the current administration’s reduced emphasis on climate-related financial regulation. First, the SEC withdrew a proposed rulemaking undertaken by the Biden administration that sought to combat greenwashing in ESG (or similarly labeled funds) — in effect, the funds would have been required to provide disclosures demonstrating that they adhered to their stated ESG strategy (and now are no longer required to do so). Second, the SEC withdrew certain guidance — dating from the Bush (II) administration — that required disclosure of environmental actions brought by a foreign government. So, companies could now choose to avoid reporting on climate change litigation brought by foreign governments. On a similar note, the current administration’s Department of Labor announced that the Department of Labor rule promulgated by the Biden administration — which enabled ESG factors to be considered when making investments on behalf of 401(k) plans — would be replaced by a new rule that will likely prohibit the consideration of ESG factors when investing on behalf of 401(k) plans.

While the federal government is currently deemphasizing climate disclosures as part of financial regulation, certain states — especially California — are embracing the opposite approach. On May 29, 2025, the California Air Resources Board — the regulatory agency responsible for implementing California’s mandatory climate disclosures — offered further guidance with respect to those regulations. Specifically, the California Air Resources Board stated that it would rely upon the tax code’s expansive interpretation of “doing business in California” to determine whether a company needed to make the mandatory climate disclosure (if the company also satisfied the revenue threshold of either $500 million or $1 billion, depending upon the type of disclosure). The California Air Resources Board also noted that the detailed implementing regulations are delayed, which could make compliance by the initial deadline of January 1, 2025 challenging for affected companies.

Noteworthy Court Decisions

There were a number of noteworthy court decisions over the past month:

• A federal district judge approved certain SEC rules promulgated by the first Trump administration that erected barriers to activist investors who sought to have shareholder proposals — often involving topics of social or environmental concern — considered by corporations. (Shareholders are now subject to, among other things, a requirement that they hold the stock in question for a longer period of time, and that their share of the company’s equity be more substantial.)
• The Court of Appeals of the State of New York upheld New York City’s Local Law 97 — which imposes strict restrictions on greenhouse gas emissions for large buildings and assesses penalties for noncompliance — against a previously successful legal challenge that had argued that it was preempted by state climate regulation. This ruling may provide further impetus to other localities in New York State in similar efforts to enact climate regulations.
• An appellate court in Germany dismissed a long-running lawsuit brought against a major German energy company by a Peruvian farmer for alleged damages stemming from climate change due to the inability of the plaintiff to prove damages. However, the court’s reasoning provided certain encouragement to the environmental groups backing the lawsuit, as it could be interpreted as establishing the general principle that emitters of greenhouse gases could ultimately be held liable for damages attributable to climate change, even if that principle did not apply in this specific instance due to particular factual concerns.

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