Governance & Sustainability Roundup – March 16, 2026

Welcome to our Governance & Sustainability Roundup — Our regular briefing that gives a quick overview on what has happened recently in the world of governance and sustainability that may be of interest to your company, your executive team, or your boards. This is a fast-evolving space, and we hope to share brief highlights with you on a regular basis. V&E is happy to discuss any of these updates in more detail, so please reach out with any questions.

Key Developments You Should Know

Forthcoming CARB Public Workshop on SB 253:The California Air Resources Board (“CARB”) will hold a virtual public workshop on March 23, 2026, to further discuss the development of SB 253 — the Climate Corporate Data Accountability Act. SB 253 is not currently enjoined, unlike SB 261 (the Climate-Related Financial Risk Act), which is on pause following a Ninth Circuit order in late 2025. The public workshop will provide further information on the August 10, 2026, emissions reporting deadline for regulated entities’ Scope 1 and Scope 2 greenhouse gas (“GHG”) emissions. Additionally, the workshop will discuss the next steps in SB 253’s regulatory development as well as preliminary thoughts on Scope 3 GHG emissions reporting under the law. Companies subject to the reporting requirements of SB 253 may wish to attend the public workshop and, where applicable, submit comments on the law.  V&E is closely monitoring developments on the California climate reporting laws and will share relevant updates as they become available.

Trump Administration Sues California Again, This Time Shutting Down Standards Limiting Pollutants From Light-Duty Vehicle Tailpipes: On March 12, 2026, the Department of Justice (“DOJ”), on behalf of the National Highway Traffic Safety Administration (“NHTSA”), filed suit targeting CARB’s standards for limiting pollutants from light-duty vehicle tailpipes and California’s efforts to boost the production of zero-emission vehicles. The DOJ, in its press release, explained that its suit is aimed at preventing California from “imposing an illegal electric vehicle (EV) mandate through what are effectively state-specific mileage requirements for car manufacturers.” Specifically, the lawsuit alleges that California’s rules are in violation of the Energy Policy Conservation Act, which makes the NHTSA responsible for adopting regulations related to fuel economy. The Trump administration and California have long been in a battle regarding the latter’s efforts to curb emissions and promote the adoption of EVs. For example, last summer (June 2025), the Trump administration blocked California’s ban on the sale of new gas-powered cars by 2035. And, during Trump’s first term, the administration revoked California’s authority to adopt stricter emissions standards than those adopted by the federal government, pursuant to approval from the U.S. Environmental Protection Agency. (The Biden administration later reinstated California’s waiver authority in 2022.) Although it is uncertain at this time how the lawsuit will progress and what, ultimately, the outcome of this litigation will be, companies are advised to keep a close eye on developments in this space, particularly as California is known as a forerunner with respect to its climate efforts. Neither California nor the Trump administration appear to be inclined to give way to the other, so the battle continues.

Greenwashing Litigation Updates: The Federal Court of Australia in February 2026 dismissed a lawsuit brought by the Australasian Centre for Corporate Responsibility against Santos (a gas producer) for greenwashing claims. The suit, first filed in 2021, alleged that Santos misled the public regarding its claims of producing “clean energy” via “clean” natural gas and “zero emissions hydrogen,” and that it had a “clear and credible pathway” to reach net zero emissions by 2040. The Federal Court of Australia dismissed the claims and, in a lengthy judgment, explained that none of the claims were misleading. Rather, the Federal Court of Australia found that Santos’ representations of natural gas as “clean energy” or “clean fuel” were reasonably true when natural gas is being compared to coal and diesel; that Santos’ representations of hydrogen as “clean” and “zero emissions” referred to hydrogen produced from natural gas in conjunction with carbon capture and sequestration (commonly known as CCS) and purchased carbon offsets (thereby resulting in no net emissions); and, finally, that Santos’ emissions targets were understood to be aspirational objectives rather than binding commitments. Even though this is not a U.S. development and there is generally no binding effect on domestic jurisprudence, the Federal Court of Australia’s ruling is worthy of note for companies making similar claims. This case demonstrates how the judiciary could potentially assess widely published net zero targets by energy companies and, importantly, what context is looked at with respect to a company’s sustainability claims (and the language used regarding the same).

Separately, in the United States District Court for the Northern District of California, a judge granted Apple’s motion to dismiss a class action lawsuit alleging the company made deceptive statements regarding its Apple Watch products as “carbon neutral.” In the case, dismissed in late February 2026, the plaintiffs contended that Apple’s use of carbon credits from projects certified under the Verified Carbon Standard were misleading as such projects did not deliver actual emissions reductions. The court dismissed the claims, noting that the plaintiffs’ allegations were based on their own analysis of Apple’s use of carbon credits, relied on unsupported assumptions, and lacked validation from scientists, experts, and other sources. The court found the plaintiffs’ allegations were insufficient to survive a motion to dismiss, but gave plaintiffs leave to amend.  The use of carbon credits has become a controversial practice in recent years with critics arguing carbon accounting lacks rigor or there is an inherent misleading aspect to the use of carbon offsets when there generally are not operational changes affecting the carbon footprint of the subject product itself. While Apple prevailed here, the ruling should not be read as a blanket endorsement of carbon credit-based neutrality claims; the court’s focus on the plaintiffs’ evidentiary shortcomings means that a future, better-supported challenge could reach a different result, and companies relying on carbon offsets to underpin “carbon neutral” or “net zero” commitments should be rigorously vetting the quality, verifiability, and additionality of those credits.

Proxy Advisory Firms Face New Challenges from States: Thirteen states (primarily “red” states) have introduced or are considering bills that would impose new requirements on proxy advisors, including obligations to provide prescribed written financial analyses or specific disclosures when making voting recommendations, particularly recommendations opposing management. Indiana’s law, effective date of July 1, 2026, would require proxy advisors to perform written financial analyses before recommending against management. Several other states have proposed similar bills, with scopes ranging from asset managers to all companies regulated by the state. In response to some of this legislation, Glass Lewis has argued that mandating an analysis for each negative recommendation made across thousands of companies would be impractical, and that the bills could lead to the use of state law to affect corporate conduct beyond the borders of that state and could chill or compel speech in violation of the First Amendment. These new bills come on the heels of Texas’s proxy advisor bill, which the U.S. District Court for the Western District of Texas enjoined before the law could go into effect as well as a recent Executive Order that impacts proxy advisors. These actions illustrate the headwinds facing proxy advisor firms, as part of a multi-pronged attack on perceived non-pecuniary advice that has driven corporate behavior in recent years.

More Shareholders File Lawsuits Over Excluded Proposals: In early March, shareholders filed two new lawsuits for companies that excluded shareholder proposals under the Securities and Exchange Commission’s (“SEC”) revised no-action process, bringing the total number of known lawsuits to at least five. The Comptroller of the State of New York filed a lawsuit in the U.S. District Court for the District of Massachusetts against BJ’s Wholesale for excluding a deforestation proposal from its 2026 proxy materials. Meanwhile, As You Sow filed a complaint in the U.S. District Court for the District of Columbia, challenging Chubb Limited’s decision to exclude a climate-related shareholder proposal from its 2026 proxy materials. The moves come amid a novel wave of shareholder proposal litigation following the SEC’s November 2025 announcement that it would no longer substantively review most Rule 14a-8 no-action requests, effectively shifting these disputes from an administrative process overseen by the SEC to one where each corporate issuer makes its own determination whether or not to exclude a proposal based on prior SEC guidance and legal precedent. The lawsuits follow decisions by AT&T Inc. and PepsiCo, Inc. to settle their respective shareholder proposal lawsuits by agreeing to include the respective shareholder proposal in their proxy materials. These developments underscore the new litigation risks that now accompanies shareholder proposal exclusion decisions and may illustrate the prudence for companies to engage with shareholders and carefully analyze and document any reasonable basis the company relies on for excluding a shareholder proposal. While many of these proposals remain unlikely to garner significant shareholder support were they to make it to a ballot, unilateral decisions to exclude the proposal might lead to their own unintended consequences for corporate issuers, such as management distraction and litigation costs should the rejected proponents decide to bring suit.

Exxon Asks Shareholders to Consider Texas: Exxon Mobil Corp (“Exxon”) proposed a plan to reincorporate the company in Texas, to be voted on by shareholders at the company’s 2026 annual meeting. Exxon’s move underscores a growing contingent of non-controlled companies, such as ArcBest Corporation and Texas Capital Bancshares, Inc, that have also proposed to reincorporate in Texas. Although Exxon is proposing to move from New Jersey, its corporate domicile for more than a century, the state of Delaware has been the default jurisdiction for most U.S. public companies, the Delaware General Corporation Law has served as the United States’ de facto national corporate law and the Delaware courts have been perceived as the most sophisticated courts to expeditiously review and consider groundbreaking corporate legal issues. Companies seeking to reincorporate in Texas have highlighted several perceived benefits for making the move to the Lone Star State, such as Texas’s business-friendly reputation, deference to board decisions, a strong statute-driven fiduciary duties framework, and a lowered risk of frivolous litigation. Reincorporation decisions are highly fact specific and require the careful exercise of a board’s judgment to determine what is in the best interests of the company and its stockholders. For more information, see our recent insight article.

Nasdaq Texas Joins Y’all Street: Nasdaq Texas officially launched on March 5, 2026, making it the third Texas-based listing exchange, alongside NYSE Texas, which has been operational for nearly a year, and the Texas Stock Exchange, which received SEC approval last September. Nasdaq joined the inaugural cohort of dual-listed companies, alongside APA Corporation, Construction Partners, J.B. Hunt, Huntington Bancshares, and ProFrac Services. NYSE Texas now has more than 160 companies listed or dual-listed. Both exchanges have structured the dual‑listing process to require limited additional effort, and Nasdaq Texas is waiving application and annual listing fees for the first year. At present, both Texas exchanges operate as dual‑listing‑only venues, although Nasdaq Texas has indicated that it intends to transition to a primary listing exchange in the future. Companies considering a dual listing should note that NYSE’s annual compliance letter flagged the need to provide delegation on EDGAR Next for the applicable exchange account in advance of any Form 8-A filing.

SEC Provides Additional Section 16 Guidance for Foreign Private Issuers: On March 5, 2026, the SEC exercised its exemptive authority under the Holding Foreign Insiders Accountable Act (the “HFIAA”), issuing an order relieving directors and officers of foreign private issuers (“FPIs”) incorporated in six qualifying jurisdictions from Section 16(a) reporting on the basis that those jurisdictions impose substantially similar insider reporting requirements. The qualifying jurisdictions are Canada, Chile, the European Economic Area, the Republic of Korea, Switzerland, and the United Kingdom. The exemption is subject to two conditions: (1) the individual must actually be reporting under the applicable qualifying regulation in that jurisdiction, and (2) an English-language version of any report must be made publicly available within two business days. Importantly, the exemption only applies if the FPI is both incorporated in a qualifying jurisdiction and subject to a qualifying regulation, meaning an FPI incorporated in a non-qualifying jurisdiction but listed in the EU, for instance, would not qualify, and its directors and officers would still need to file Section 16 reports.

The SEC staff also published additional responses to frequently asked questions on March 12. The SEC staff noted, among other things, that, in light of the unusually large number of Form ID applications as a result of the HFIAA, SEC staff will not recommend enforcement actions against directors or officers of an FPI that file their Section 16(a) report before April 1, 2026, so long as the person submitted a complete Form ID prior to March 18, 2026, and did not receive EDGAR access by March 18, 2026.

FPIs not covered by the exemption should confirm that their directors and officers subject to Section 16(a) reporting requirements have submitted complete Form IDs prior to March 18, 2026, and have obtained EDGAR credentials and are prepared to file initial Form 3 reports by the April 1, 2026 deadline.