Other Notable Developments

Sustainability Assurance: The International Auditing and Assurance Standards Board and the International Ethics Standards Board for Accountants published ethics standards and new guidance regarding sustainability assurance.

U.S.: Texas Attorney General Warns Financial Institutions Over DEI and ESG Policies

On January 27, 2025, Texas Attorney General Ken Paxton, along with 10 other state Attorneys General, sent a letter to six major financial institutions warning that their diversity, equity, and inclusion (“DEI”) and ESG policies may violate state and federal laws and could lead to enforcement actions pending a review of the financial institutions’ practices.

The letter alleges that the firms have implemented unlawful race- and sex-based hiring quotas, engaged in discriminatory contracting practices, and made investment decisions based on political and environmental agendas rather than financial returns. It also questions whether their past participation in net-zero alliances, such as the Net Zero Banking Alliance, conflicted with their fiduciary duties.

In October 2023, Paxton issued an advisory letter on enforcing Texas laws prohibiting state government contracts with companies that boycott energy firms, firearm businesses, or Israel. For more on the October 2023 advisory, see our previous ESG Weekly Update.

The financial institutions have been asked to respond to the letter within 45 days, providing documentation and explanations regarding their DEI and ESG policies. Paxton and the co-signing Attorneys General have indicated that enforcement actions may follow if violations are confirmed.

Links:
Attorney General Statement
January 27, 2025 Letter

U.S.: House Announces Investigation into Debanking

On January 24, 2025, U.S. House Committee on Oversight and Government Reform Chairman James Comer (R-KY) announced that the committee has opened an investigation into the “debanking,” or termination by a bank of existing accounts and relationships, of certain individuals and entities allegedly “based on political affiliation or involvement in industries viewed unfavorably by the Biden Administration.”

In a public letter addressed to several prominent founders of blockchain-related businesses, Comer stated that his committee has observed a “pattern” of financial institutions closing bank accounts or refusing to open new ones for certain politically outspoken persons or those affiliated with digital asset businesses. Comer’s letter attributes this pattern to a concentrated effort to target certain industries and political conservatives by the government or financial institutions. As evidence, the letter cites several examples of prominent cryptocurrency founders discussing difficulties obtaining or maintaining accounts with U.S. financial institutions. The letter concludes by calling on members of the public to provide testimony regarding their experience with debanking, including its purpose and impact on businesses and individuals.

Links:
Letter
Press Release
Senate Hearing

EU: European Commission Publishes Proposals to Simplify ESG Reporting

On January 29, 2025, the European Commission published “A Competitiveness Compass for the EU,” a report setting out proposals to improve EU market competitiveness, including by reducing companies’ regulatory reporting burden by 25% or more.

In relation to corporate sustainability reporting, the report announces a series of reforms aiming to simplify the requirements under the Corporate Sustainability Reporting Directive (“CSRD”), Corporate Sustainability Due Diligence Directive (“CSDDD”) and the EU Taxonomy, among other legislation. The report notes that the package will include a new definition of mid-cap companies that will benefit from reduced regulatory requirements in a similar way to current SMEs.

The proposed reform follows calls from the French and German governments:

• On January 20, 2025, the French government released a note calling on the European Commission to adopt a “highly ambitious simplification agenda.” In particular, the note urges the European Commission to postpone CSDDD indefinitely, reduce the number of data points under CSRD, and create a new category of mid-cap companies.

• On December 17, 2024, the German government released a proposal that called for a delay of two years in the application of CSRD to certain large companies and an increase in the thresholds that bring companies into scope of CSRD to align with those of CSDDD.

The European Commission announced that it will publish the first legislative proposal, referred to as a “Simplification Omnibus package,” in late February 2025.

Links:
EU Competitiveness Compass report
French Government Note (January 20, 2025, available in French)
Letter from Cabinet Members to the European Commission (December 17, 2024)

U.S.: New York State Proposes Climate Disclosure Bill

On January 27, 2025, Senate Bill S3456—known as the Climate Corporate Data Accountability Act—was introduced by the New York State Senate. If passed, the bill would require entities doing business in New York with over $1 billion in revenue to disclose annual emissions data.

Specifically, the bill would require in-scope entities to disclose their Scopes 1, 2, and 3 emissions annually. The bill would also require that disclosures conform with the Greenhouse Gas Protocol, and that they be assured by an independent third-party assurance provider. Starting in 2027, in-scope entities would be required to publicly disclose their Scopes 1 and 2 emissions, and, starting in 2028, their Scope 3 emissions.

The bill would authorize the state attorney general to impose civil fines of up to $100,000 per day for wilful failures to comply with the disclosure requirements.

New York’s Senate Bill S3456 would impose disclosure requirements similar to those under California’s climate disclosure laws. For more information on the California laws, see our Debevoise Update.

Link:
New York Senate Bill S3456

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