Legislative Sustainability Concerns for 2026
In 2026, the law firm of Lathman & Watkins said they "expect that business and legal leaders who successfully disentangle and separate economic, political, and legal risk with a clear strategic focus will be best able to capitalize on ESG/sustainability imperatives."
One of the trends is federal, state and local take on regulations.
The Trump administration reversed course on energy and environmental policy. The intent, the firm explains, is to increase domestic production of energy. Consequently, the One Big Beautiful Bill Act scaled back clean energy tax incentives put forward under the Inflation Reduction Act of 2022. In response, individual states are looking into countervailing measures, the authors explain.
The following is an excerpt from the firm's article.
On January 7, 2026, President Trump issued a presidential memorandum titled “Withdrawing the United States from International Organizations, Conventions, and Treaties that Are Contrary to the Interests of the United States,” which directs executive departments and agencies to effectuate US withdrawal from more than 60 bodies, describing many of them as “promot[ing] radical climate policies, global governance, and ideological programs that conflict with U.S. sovereignty and economic strength.”
In 2025, covered entities closely monitored developments regarding California’s Climate Corporate Data Accountability Act (SB 253) and Climate-Related Financial Risk Act (SB 261), each as amended by SB 219. These laws represent key climate change disclosure requirements in the US, though they have been subject to litigation since January 2024. On November 18, 2025, the US Court of Appeals for the Ninth Circuit granted an injunction pending appeal, halting enforcement of SB 261 — but not SB 253.
In response, the California Air Resources Board (CARB) published an Enforcement Advisory to clarify its stance, and oral arguments are slated for January 9, 2026. In parallel, CARB continues to work toward finalizing its implementing regulations. Nonetheless, we are seeing companies voluntarily post their California climate disclosure reports despite the injunction on enforcement.
On December 11, 2025, President Trump issued an executive order titled “Protecting American Investors From Foreign-Owned and Politically-Motivated Proxy Advisors,” directing the Department of Labor (DOL), Federal Trade Commission (FTC), and Securities and Exchange Commission (SEC) to take specific actions, which we may expect in the coming year.
The executive order follows recent actions by Florida and Texas aimed at proxy advisor practices, amid escalating scrutiny from Republican officials regarding proxy advisors’ influence over companies. This scrutiny is part of a broader trend, with, for example, state attorneys general alleging that net zero memberships or other climate commitments may run afoul of antitrust rules.
We expect the debate over antitrust violations, consumer harm, and fiduciary duty to continue in 2026. More broadly, we also expect asset managers, as well as LPs, to continue to refine and develop their approaches in response to the evolving landscape.
Under the Trump administration, we have also seen a resurgence in federal attention on “debanking,” addressing what the administration considers significant harm to individuals and businesses that have restricted banking services access allegedly “on the basis of political or religious beliefs or lawful business activities.” This resurgence includes the August 2025 executive order “Guaranteeing Fair Banking for All Americans” and a variety of actions taken by prudential financial regulators.
International Reporting
The authors note that around 40 jurisdictions have decided to use, or are moving to incorporate, the International Sustainability Standards Board (ISSB) standards into their regulatory frameworks, covering nearly 60% of global GDP.
However, implementing these standards can be a challenge as "material differences persist in national implementation as a result of timing, phase-ins, scope of application (often limited to listed entities), and local regulatory expectations. The split between mandatory and voluntary use of the ISSB standards is also significant."
The authors offered this analysis, excerpted below.
The Asia-Pacific region demonstrates this balance of convergence and divergence. The region has shown notable uptake in shifting from voluntary to mandatory disclosures. In-scope entities in several jurisdictions, including Australia, Hong Kong, Malaysia, and Singapore, are scheduled to issue their first ISSB‑aligned reports in 2026, mostly starting with the largest listed companies (although Australia’s reporting also extends to large private companies). In 2025, Singapore announced a delay for most listed companies in respect of ISSB‑based climate disclosures, following feedback that smaller listed issuers required additional time to prepare. Given this decision, we will watch to see if Singapore’s regulatory stance has an impact on the reporting timeline for other jurisdictions. Separately, South Korea is proposing an ambitious ESG/sustainability reporting and due diligence agenda.
Global alignment around the ISSB standards is advancing, but the path to a high level of convergence will be gradual and uneven. Companies should plan for jurisdiction-specific timelines, phased scoping mechanisms, and evolving supervisory expectations, while leveraging the ISSB baseline. The expanding regulatory dialogue on interoperability is encouraging. However, without true interoperability, companies operating across borders will need to manage a hybrid environment that combines a global baseline with local overlays.