Governance & Sustainability Roundup – March 30, 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

Maryland Dismisses Local Government’s Climate Tort Lawsuits Against Fossil Fuel Companies: On March 24, 2026, the Supreme Court of Maryland affirmed lower court dismissals of three climate change lawsuits bought by local governments against fossil fuel companies on the basis that such claims are displaced and preempted by federal law. The city and county of Baltimore, the city of Annapolis, and Anne Arundel County alleged that certain fossil fuel companies had concealed the climate risks of fossil fuel production and use, thereby violating state nuisance and consumer protection laws. However, the Supreme Court of Maryland found that the local governments’ claims were an attempt to regulate interstate air emission pollution, an area that is a matter of federal law as indicated by the Supreme Court of the United States in a number of cases.

The decision by the Supreme Court of Maryland relied heavily on the United States Court of Appeals for the Second Circuit’s dismissal in 2021 of New York City’s climate tort lawsuit, rejecting the argument that the local governments’ claims were limited to alleged deceptive and misleading conduct (and, therefore, falling firmly within local police powers). The Supreme Court of Maryland found there was no getting around that the local governments’ were attempting to apply Maryland law to conduct beyond the state’s jurisdictional borders, targeting worldwide conduct in the companies’ production, marketing and sale of fossil fuels.

Interestingly, the Supreme Court of Maryland’s decision demonstrates disagreement with its counterparts in both Colorado and Hawaii, where such lawsuits against fossil fuel companies have been allowed to proceed. Moreover, the Supreme Court of Maryland rejected a request by the local governments to stay the case until the Supreme Court of the United States issues its ruling regarding the Colorado Supreme Court’s decision to allow the city and county of Boulder climate tort lawsuit to proceed.

Although this ruling simply adds to the growing chaotic patchwork of climate change lawsuits across the states, it is important for companies to continually evaluate such cases to determine what arguments are being bought by litigants in this space and how successful such arguments are. Furthermore, companies are advised to watch out for the Supreme Court of the United States’ ruling in the Boulder climate tort lawsuit given the potential impact this may have on dozens of other cases.

TotalEnergies and Department of Interior Enter Deal to End U.S. Offshore Wind Projects: The U.S. Department of Interior and TotalEnergies (“Total”) have entered into an agreement for Total to stop development of new offshore wind projects in the U.S. and to recover $1 billion in lease fees from the U.S. government. The reimbursed funds will be redirected by Total into U.S. gas and power projects. Pursuant to the agreement, Total will relinquish its leases in Carolina Long Bay and New York Bight, reinvesting the reimbursed funds to finance the construction of an LNG plant in Texas and develop conventional oil and gas projects.

Since taking office, the Trump administration has targeted offshore wind projects, particularly those in the early stages. President Donald J. Trump signed an Executive Order on his first day in office halting all federal approvals for wind energy projects and, more recently, pausing leases for all large-scale offshore wind projects under construction (the latter based on U.S. national security grounds). While efforts to completely stop offshore wind projects have not been fully successful (the initial halt was struck down and the projects targeted by the paused leases have moved for preliminary injunctions), wind power investment has become more difficult for developers.

Companies are advised to keep a close eye on the Trump administration’s actions in this space, not just with respect to offshore wind energy projects but also renewable energy projects more generally. Adaptation and modification of company strategies might be necessary to accommodate and account for changing attitudes toward sustainability at large, particularly in the U.S.

California’s “Truth in Recycling” Label Law Challenged: Senate Bill 343, which becomes operative in October 2026, bars the use of certain packaging symbols — such as the “chasing arrows” synonymous for recyclability — unless certain criteria are met. Trade associations have now challenged Senate Bill 343, known as the “Truth in Recycling” or “Truth in Labeling” law, asserting that the law restricts producers’ speech, is costly and time consuming, and applies a “unique, rigid, and complex definition.” The trade associations seek both preliminary and permanent injunctions of the law’s enforcement (by both private and public regulators alike), as well as a declaration that the law violates the First and Fourteenth Amendments.

Pursuant to the law, the California Department of Resources Recycling and Recovery publishes data about materials actually recycled in the state, with such data to be used by manufacturers to assess whether products are “recyclable” for labeling purposes. The law is intended to crack down on “greenwashing” and hold businesses accountable for false recycling labels. The challengers assert that, in order to avoid potentially high criminal and civil penalties, businesses will have to undertake a burdensome analysis of materials contained in their products/packaging to ensure they comply with the law. Additionally, the challengers assert that the law contradicts other states’ laws and excludes materials made through alternative collection methods (i.e., not solid waste facilities, which the law covers).

California’s green efforts continue to attract attention. Companies potentially subject to the state’s “Truth in Recycling” law should follow this challenge closely. However, while the lawsuit proceeds, affected companies should begin using the data available from the California Department of Resources Recycling and Recovery and integrating such analyses into internal processes, noting whether they may need to rethink their labeling.

President Trump Issues New Executive Order Targeting DEI Practices by Federal Contractors: On March 26, 2026, President Trump issued a new Executive Order, Addressing DEI Discrimination by Federal Contractors, imposing new obligations on companies doing business with the federal government. The order defines “racially discriminatory DEI activities” as disparate treatment based on race or ethnicity in hiring, promotions, vendor contracting, and program participation. Executive agencies must begin incorporating new contract clauses within 30 days requiring contractors to certify compliance, report subcontractor violations, and acknowledge that noncompliance may be material under the False Claims Act — with consequences including contract termination, suspension, or debarment.

Notably, the order appears to decentralize implementation across individual contracting agencies rather than through a single body like the Office of Federal Contract Compliance Programs (OFCCP). This decentralized approach could produce inconsistent standards for enforcement across agencies, and the compressed implementation timelines might raise challenges regarding whether required rulemaking procedures are being followed. The Executive Order targets conduct — disparate treatment on the basis of race or ethnicity — that is and has already been unlawful; the order may, therefore, represent more of a shift in enforcement posture than a change in underlying legal obligations.

This newest Executive Order comes on the heels of various DEI-related Executive Orders issued by the Trump administration, including as it relates to federal funding recipients. Federal contractors and subcontractors should promptly assess their DEI-related programs and practices in light of this order — particularly training, mentoring, and leadership development initiatives that may fall within its broad definitions. V&E has deep expertise assisting companies, particularly those that contract with the Federal Government, regarding compliance and False Claims Act risk.

SEC Allegedly Considering Shift to Semiannual Reporting: The Wall Street Journal recently reported that the Securities and Exchange Commission (“SEC”) is imminently preparing to publish a proposal eliminating the requirement for public companies to report quarterly financial results, possibly replacing the current reporting regime with a semiannual reporting schedule. The SEC issued a request for comment on periodic disclosures during the first Trump administration, though the rule never came to fruition. Semiannual reporting is already the norm in the European Union, United Kingdom and Australia, among other jurisdictions, although many international companies subject to semiannual reporting requirements still voluntarily report on a more frequent quarterly cadence.

President Trump has publicly praised the move from quarterly to semiannual reporting, and SEC Chairman Paul Atkins indicated the SEC would prepare recommendations for a proposed rule as part of a broader effort to eliminate compliance burdens on companies. Proponents contend that less frequent reporting could reduce compliance costs, mitigate short‑term market pressures, allow management to focus on business execution rather than reporting preparation, and promote longer‑term strategic decision‑making by management. On the other hand, some critics have claimed that reduced reporting frequency could limit transparency for investors and restrict the flow of material information to the markets. Even if the SEC adopts a semiannual reporting framework similar to what is seen in other global markets, some companies may determine that making voluntary quarterly reports better aligns with their investor and shareholder expectations.

Exclusions of Rule 14a-8 Shareholder Proposals Continue to Face Legal Challenges: Litigation challenging the exclusion of Rule 14a-8 shareholder proposals continues to increase following the SEC Staff’s decision to largely withdraw from the traditional no‑action process. As described in this V&E insight, on March 19, 2026, the Interfaith Center on Corporate Responsibility and As You Sow filed suit against the SEC, alleging that the agency violated the Administrative Procedure Act by allowing companies to exclude shareholder proposals through informal guidance rather than formal rulemaking. The plaintiffs argue that the SEC’s November 2025 announcement, under which the Division of Corporation Finance generally ceased issuing substantive no‑action responses, effectively altered long‑standing Rule 14a‑8 procedures without the required notice-and-comment period.

This lawsuit follows a series of actions brought earlier in the proxy season by shareholder proponents against companies that excluded proposals pursuant to the SEC Staff’s revised approach. Historically, challenges to Rule 14a‑8 exclusions were rare, as the no‑action process provided a predictable framework for resolving disputes. However, with the SEC now largely declining to weigh in on requests by companies to exclude shareholder proposals, proponents are increasingly turning to the courts to contest the exclusion of their proposals.

These developments might signal a broader shift in how Rule 14a‑8 disputes are likely to be resolved going forward. While the SEC’s revised approach was intended to streamline the proxy process for the 2026 proxy season, it has introduced greater uncertainty and litigation risk for both issuers and proponents. Companies should carefully assess the legal and strategic implications of excluding shareholder proposals this proxy season, including the possibility that exclusion decisions may now be subject to heightened judicial scrutiny rather than administrative review.

SEC Provide Relief for At-the-Market Issuers Transitioning to “Baby Shelf”: On March 19, 2026, the SEC’s Division of Corporation Finance published new Corporation Finance Interpretation (“CFI”) 116.26, addressing a practical issue concerning smaller issuers conducting at-the-market (“ATM”) offerings. The new guidance considers the situation in which a company enters into an ATM sales agreement at a time when it has an effective Form S-3 registration statement and is eligible to offer and sell securities under General Instruction I.B.1, but subsequently falls below the $75 million public float threshold at the time of its next Section 10(a)(3) update, putting the company into “baby shelf” territory. Since companies generally structure ATM offerings to raise capital over an extended timeframe, a company could occasionally find itself falling below the public float threshold while the ATM offering is ongoing, calling into question whether the company could lose its eligibility to continue selling securities under the program. Under the new CFI, SEC Staff will not object if a company continues to offer and sell the full amount of securities covered by the prospectus supplement filed prior to the Section 10(a)(3) update, even if that amount would exceed the baby shelf limits.

This information is provided by Vinson & Elkins LLP for educational and informational purposes only and is not intended, nor should it be construed, as legal advice.