The Anti-ESG Backlash and the New Politics of Corporate Disclosure

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Over the past few years, environmental, social, & governance (ESG) regulations have grown in importance, holding public and private companies accountable for disclosures about their social and ecological impacts. ESG guidelines encourage companies to report their greenhouse gas emissions, diversity metrics, supply-chain practices, and climate-related financial risks to promote social responsibility among the largest corporations. Starting in the 2020s, the US government has begun implementing several ESG requirements. This follows a number of high-profile events that brought new attention to ESG issues, including the rise in climate-related disasters, the Black Lives Matter movement, and COVID-19, which intensified the focus on human capital management and supply chains. 

At the state level, these regulations initially took the form of pro-ESG laws, including climate-related disclosure requirements or requisites for state-level investment funds to integrate ESG factors. For example, California’s Climate Corporate Data Accountability Act (CCDAA), which passed in 2023, requires large companies to publicly disclose all emissions, whether they be direct, indirect from purchased energy, or indirect from supply chains. New York’s Climate Change Super Fund Act (CCSFA) was passed in 2024 and requires major fossil fuel companies to contribute to a state fund to finance climate mitigation infrastructure projects. At the federal level, ESG regulations have centered on climate-risk disclosure rules and efforts to standardize what is considered “financially material” ESG information. For example, the new U.S. Securities and Exchange Commission (SEC) regulations aim to standardize ESG reporting, prevent “greenwashing”, and provide investors with relevant data by requiring ESG-related disclosures. In practice, this would mean ESG assessments grounded in consistent, verifiable metrics material to firms’ business strategies, operations, or financial conditions, rather than vague or symbolic initiatives that could mislead investors.

Markets seem to be adapting to these ESG norms enthusiastically. Several studies have found a positive correlation between ESG compliance and corporate performance. By 2022, more than 90 percent of S&P 500 companies published ESG reports or SEC filings in some form. In the same year, the Department of Labor implemented a rule allowing retirement fund fiduciaries to consider ESG factors in investment decisions, which reaffirmed that climate risk could be treated as an investment risk rather than as an ideological choice.

As the pro-ESG movement gained momentum worldwide, anti-ESG backlash has recently emerged in the U.S., with a growing number of states introducing legislation that penalizes companies and financial institutions that adopt ESG regulations. In the first week of his administration, President Trump issued a series of executive orders, including Executive Order 14173, targeting DEI-related programs in the public and private sectors. It should be noted that anti-ESG legislative efforts, primarily state-level bills, have, in many instances, failed in state legislatures across the country. However, in 2023 alone, 165 pieces of anti-ESG legislation were introduced across 37 states, while 14 states successfully enacted bills restricting the use of ESG criteria in state contracting, lending, and pension-fund management. 

Primarily, there are two types of anti-ESG regulations: “No-ESG-investment regulations” and “boycott” regulations. No-ESD investment rules prohibit state investment managers from considering ESG factors in investment strategies for any purpose other than maximizing financial returns. By contrast, boycott regulations specifically target financial institutions whose investment policies exclude or reduce exposure to fossil-fuel or other politically sensitive industries, prohibiting the state from doing business with or investing state assets in said firms.  In Texas, for instance, many major banks, investment firms, and fossil fuel companies were barred from working with state and local agencies if they adopted pro-ESG policies by Senate Bill 13 (SB13) and House Bill 20 (HB20), both enacted in 2021. In Florida, House Bill 3 (HB 3) likewise prohibits the use of ESG clauses in state and local government investment decisions, contracting processes, and banking practices. The source of this backlash? A mix of growing partisan polarization, industry-driven political pressure, and critics arguing that ESG regulations represent a form of “woke capitalism” rather than a financially grounded investment. 

One of the main objections to ESG is the claim that it gets in the way of business profits. In other words, while ESG regulations are good for companies’ public image, they inhibit their ability to invest in high-yield sectors like gas, oil, and coal. Another objection revolves around the practical complications of implementing ESG in a way that resonates across multiple stakeholders in a given company. The “E,” “S,” and “G” often pull firms in different directions and require tradeoffs that are difficult to operationalize. Critics also note that ESG functions as an “umbrella term that bundles together multiple financial and non-financial factors when scoring firms or constructing index funds, including measures like workforce diversity. Along with other commonly used social or governance indicators, diversity metrics are not clearly correlated with firms’ environmental performance or financial output, which can lead ESG funds to include firms that score well on diversity or governance while remaining weak on environmental or broader social responsibility. It is also challenging to accurately measure ESG scores, given the lack of standardized metrics across rating agencies. Further, critics debate whether the links between ESG compliance and financial returns are causal or attributable to industry-specific and macroeconomic factors.

The impact of the anti-ESG movement on the business world became evident in 2025 during the second Trump administration. In response to a shifting political and regulatory environment, many companies have modified or even ended their DEI-related commitments. Since January of this year, 59 percent of the S&P 500 significantly revised or removed DEI-related disclosures previously made on their 10-K filings with the SEC. References to “SEC” or similar language have also declined, from 90 percent of companies in 2024 to just 34 percent in 2025. These transitions demonstrate how quickly corporate disclosure practices can change in response to political pressure and legal uncertainty. Despite these shifts, the same report noted that while the majority of large public companies in the U.S. have removed references to DEI and ESG-related language, the majority still disclose at least one diversity-related metric, which shows that there has not yet been a complete retreat. 

The anti-ESG legislative effort has faced significant legal challenges, and many efforts to fight anti-ESG laws have been successful; these legal challenges have been based primarily on constitutional, fiduciary-duty, and freedom-of-speech grounds. Constitutional arguments against anti-ESG laws posit that these laws aim to control political speech and interfere with federal regulation. A key example is Securities Industry and Financial Markets Association (SIFMA) v. Ashcroft, where Missouri’s federal court held that the state’s anti-ESG disclosure rules were constitutionally vague. Moreover, the court ruled that the law violated the First Amendment’s protection against compelled speech, and was preempted by both the National Securities Markets Improvement Act of 1996 (“NSMIA”), and the Employment Retirement Income Security Act of 1974 (“ERISA”). These sorts of rulings highlight a major weakness of many anti-ESG laws: they try to police how investors and advisors talk about risk and how they invest. Therefore, these decisions reaffirm the importance of reliable disclosure standards, and protecting investors’ ability to assess climate risks, and limit states’ ability to politicize risk management through viewpoint-based investment restrictions. 
Looking to the future, the legal landscape remains fluid: a growing number of suits have been filed challenging anti-ESG laws at both the federal and state levels. This includes the ongoing challenge to Texas’s SB13, which prohibits state entities from investing in or contracting with companies deemed to “boycott fossil fuels.” However, the definition in question is being litigated. These cases could signal that, at a state level, courts are carefully scrutinizing anti-ESG restrictions and may be increasingly willing to invalidate measures that conflict with federal law or fiduciary standards. As litigation continues and anti-ESG laws face new tests, the durability of ESG in the United States will depend on how lawmakers, regulators, and businesses navigate mounting societal obligations in the coming years.

Adelaida del Valle is a senior at Brown University studying Behavioral Decision Sciences. She is a Blog Writer for the Brown Undergraduate Law Review and can be reached at adelaida_del_valle@brown.edu. 
Danny Moylan is a sophomore from Massachusetts studying Political Science and International & Public Affairs. He is a staff editor for the Brown Undergraduate Law Review and can be contacted at daniel_moylan@brown.edu.