ESG trends in the U.S.: navigating fragmentation, backlash, and energy security

Litigation risk has accelerated in parallel, from greenwashing class actions to state investigations and claims asserting novel tort theories, amplifying uncertainty around disclosure, advertising, and fiduciary practice. In this unsettled environment, legal readiness and strategic adaptability have become decisive competitive tools. We explore some of the year’s key legal developments and their implications below.

Prioritizing energy security

Starting on the first day of his new term, the president issued a broad executive order (Unleashing American Energy) instructing agencies to review, pause and revise energy-related actions seen as impeding dependable domestic energy supply— “with particular attention to oil, natural gas, coal, hydropower, biofuels, critical mineral, and nuclear energy resources”. The order also contained explicit directions to accelerate permitting under the National Environmental Policy Act, revisit regulatory analyses, and refocus program funds.

Additional executive orders bearing on climate and energy issues followed in April. In the Protecting American Energy from State Overreach executive order, certain states are called out as having “burdensome and ideologically motivated ‘climate change’ or energy policies that threaten American energy dominance and our economic and national security”, including New York’s Climate Superfund Act and California’s Cap-and-Trade Program. The order also directs the attorney general to identify “State laws purporting to address ‘climate change’ or involving ‘environmental, social, and governance’ initiatives, ‘environmental justice,’ carbon or ‘greenhouse gas’ emissions, and funds to collect carbon penalties or carbon taxes”, and take all appropriate action to stop the enforcement of these laws.

This position was bolstered by the “Beautiful Clean Coal” executive order. This order requires the Environmental Protection Agency (EPA) and the Departments of Transportation, Interior, Energy, Labor, and Treasury to identify any guidance, regulations, programs, or policies that “seek to transition the [U.S.] away from coal production and electricity generation.” Furthermore, the order requires agencies to (i) rescind policies or regulations that discourage investment in coal production and coal-fired electricity generation, (ii) encourage coal exports, and (iii) assess potential uses for coal in steel production and the operation of AI data centers.

Retreat on federal ESG programs

The EPA acted in March 2025 to terminate grant agreements worth USD20 billion which had been granted to eight NGOs through the Inflation Reduction Act’s Greenhouse Gas Reduction Fund. After legal challenge, the U.S. Court of Appeals for the District of Columbia Circuit sided with the EPA in September, finding that federal officials have broad latitude to cancel funds that have been appropriated by Congress.

Likewise, many other Obama- and Biden-era environmental regulations and mandates have been rescinded or revised.

In September, the EPA proposed amending the Greenhouse Gas Reporting Program (GHGRP) to remove program obligations for most source categories (i.e., industries required to report under the GHGRP), including the distribution segment of the petroleum and natural gas systems source category. The proposal included suspending other program obligations until 2034. If finalized, the proposal would remove reporting obligations for most large facilities, as well as for fuel and industrial gas suppliers and CO2 injection sites.

In March, the Securities and Exchange Commission (SEC) voted to end its legal defence of the Climate Disclosure Rule, calling the rule “costly and unnecessarily intrusive”. In a filing with the U.S. Court of Appeals for the Eighth Circuit, the SEC said its lawyers are “no longer authorized to advance” arguments the agency had made in support of the 2024 rule. Then, on September 12, 2025, the court issued an order holding in abeyance petitions for review of the SEC’s climate disclosure rules. The court stated that the order will remain in place until the SEC decides to rescind or modify the Climate Disclosure Rule through ordinary rulemaking, or renews its defence of the rule in the litigation (which appears unlikely).

The Unleashing American Energy executive order also specifically targeted several key electric vehicle policies, mandates and funding mechanisms, including a prior Biden executive order that established a goal for 50% of new light-duty vehicle sales to be zero-emission by 2030. This effectively eliminated the federal government’s policy goal for electric vehicle adoption. It also called for terminating, “where appropriate”, state emissions waivers granted by the EPA that allow states to enforce stricter standards.

Fragmentation in the U.S. ESG landscape

The ESG landscape at the state level continues to be highly fragmented, with an increasing number of actions from both anti-ESG states and pro-ESG states, including policy letters from groups of states on both sides of the issue, legal investigations, and statutory initiatives.

Although California has been a leader among states that are pursuing their own climate reporting and disclosure laws, the U.S. Court of Appeals for the Ninth Circuit recently froze California law SB 261, which would have required companies with more than USD500 million in annual revenue that do business in California to disclose financial risks from climate change starting in January 2026. In the same order, the Ninth Circuit denied a bid to halt SB 253, a related law requiring companies with more than USD1bn in annual revenue to start reporting their greenhouse gas emissions in June 2026. The Ninth Circuit’s ruling bars California from enforcing SB 261 as the claimants pursue their litigation seeking to permanently enjoin the two laws. At oral arguments on January 9, a three-judge panel questioned the parties on freedom of speech issues. Despite this uncertainty, many companies have invested significant time and resources preparing to comply with SB 261’s climate risk disclosure rules, and are continuing their preparations while monitoring the litigation developments. A written decision is expected from the Ninth Circuit in the coming months, which will determine whether the law will be permanently blocked or allowed to move forward.

In August, a coalition of 23 state Attorneys General sent a letter to the Science Based Targets initiative (SBTi) challenging SBTi’s “Financial Institutions and Net-Zero Standard” and demanding information about the organization and its members. The letter cited concerns about potential violations of antitrust and consumer protection laws. 

The Texas Attorney General announced in September his office’s investigation into two proxy advisory firms for allegedly issuing voting recommendations that “advance radical political agendas rather than sound financial principles”, potentially misleading institutional investors and public companies. The announcement cited examples that included “aggressive climate activist policies”.

Seeking to combat the surge of “anti-ESG” actions, Democratic state officials from 17 states sent letters to at least 18 major asset managers urging them to actively consider long-term risks such as climate change, supply chains, and corporate governance in investment decisions, and to reject Republican pressure to abandon ESG considerations in their investing decisions. The officials argue that “fiduciary duty calls for active oversight, responsible governance, and the full exercise of ownership rights”, warning that the GOP’s anti-ESG stance puts American retirement money at risk.

Litigation growth

Greenwashing litigation has also continued to expand in the U.S., especially consumer class actions challenging marketing and labeling. Watchdogs report well over 150 U.S. greenwashing class actions tracked through early 2025, with California and New York being the most active venues.

While private greenwashing suits may be proliferating, many complaints end up being pared back or dismissed when the challenged statements are aspirational, generalized, or “puffery”, or when the defendant “shows its working” with transparent methodologies and qualifications. On the other hand, a meaningful number of claims survive motions to dismiss—particularly when plaintiffs challenge concrete, product-specific claims (for example, using terms like “recyclable”, “reef safe”, “humane”, or “sustainable”) on labels or websites and can show demonstrable inaccuracies or a plausible theory of reasonable consumer deception. Securities class actions premised on ESG statements have generally proceeded at a slower pace and with mixed results, with several losses at the pleadings stage and occasional settlements (which are often tied to other claims such as breach of fiduciary duty, rather than being pure “greenwashing” actions).

Private litigants may also seek to link oil and gas businesses to personal losses under novel legal theories. A claim filed against major oil companies in a Washington county court in May claimed to be the first-ever climate change wrongful death lawsuit. The complaint alleged that the defendants’ deceptive conduct delayed measures to mitigate and adapt to climate change and was the proximate cause of the plaintiff’s mother’s death in an extreme heat event. Similarly, in November, a proposed class action was filed in Washington federal court by two Washington homeowners against six major oil companies. The plaintiffs argued that because the defendant companies had not taken responsibility for climate change, homeowners had suffered rising insurance costs from weather-related disasters.

The plaintiffs alleged that the companies violated (i) the federal Racketeer Influenced and Corrupt Organizations Act (RICO) and (ii) various state laws, to conceal the industry’s impact on the environment. They asked the court to certify a class of “all persons who purchased homeowner insurance at any time after 2017” in connection with the RICO claims.

What to expect over the short, medium, and long term

In the short term (6–12 months), one of the key challenges emerging this year is that regulatory certainty and consistency are increasingly in short supply in the ESG arena. Most businesses should therefore focus on mapping legal exposure across federal and state rules. Double-check that your external messaging is aligned with financially material, reliability-relevant risks and opportunities, and establish a litigation-aware review of your claims and marketing.

In the medium term (12–18 months), create or refine your reporting architecture so that it is capable of serving multiple jurisdictions and managing emerging assurance expectations. Consider embedding energy security into your existing climate transition plans. Prepare for potential regulatory inquiries and enforcement by reviewing your escalation protocols.

Over the long term (18 months–5 years), continue to actively manage climate-related risks, balancing current sustainability practices with tangible business and financial impacts and your overall approach to enterprise risk. Related considerations include pressure from shareholders, investors, customers, clients and other stakeholders, scrutiny from regulators, disclosure and governance requirements from non-U.S. regimes, and reputational risks. These risks obviously cannot and should not be ignored. Rather, the key will be to ensure that you are managing them prudently, consistent with your wider obligations to protect the integrity of your business, your obligations to your stakeholders, and your obligations under applicable law.