Governance & Sustainability Roundup – May 5, 2026

Welcome to our Governance & Sustainability Roundup — Our regular briefing that gives a quick overview on what has recently happened 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.

Breaking News

SEC Proposes Rules for Optional Semiannual Reporting

The Securities and Exchange Commission (“SEC”) is kicking off Cinco de Mayo with the announcement of a proposed rule to allow public companies the elect to file interim reports on a semiannual basis (on new Form 10-S) rather than on a quarterly basis (on Form 10-Q). Under the proposal, the filing deadline for semiannual reports on Form 10-S would be 40 or 45 days after the end of the first semiannual period of the fiscal year, depending on the company’s filer status. The proposal also would amend Regulation S-X to reflect the new semiannual reporting option and simplify the existing financial statement requirements. Keep an eye out for more details and a comprehensive discussion in an upcoming V&E Insight.

Other Key Developments You Should Know

Regulation S-K Review — Comment Letters

On January 13, 2026, SEC Chairman Paul Atkins announced a comprehensive review of Regulation S-K, which prescribes the disclosure framework for public company filers, with the stated goal of refocusing the framework on eliciting material information and eliminating requirements that compel disclosure of immaterial information. The SEC received more than 100 comment letters from individual investors, researchers, and key market participants and trade groups during the comment period, which closed on April 13, 2026. The letters underscored a general lack of consensus by commenters, with conflicting views about the extent to which the SEC should allow for flexibility in disclosures, the use of safe harbors and liability protections to curb overly broad disclosure driven by litigation risk, and whether disclosures obligations should be adjusted based on company size, maturity and sector. The SEC Division of Corporation Finance will use this feedback to inform proposed rulemaking to modernize Regulation S-K, in accordance with its September 2025 Regulatory Flexibility Agenda.

Shareholders Develop New Avenues for Exempt Solicitation Postings

Shareholders have created new outlets for promoting their proposals after the SEC halted the ability for holders of less than $5 million of a company’s securities to make voluntarily solicitations on the company’s EDGAR page. The SEC’s new guidance, issued earlier this year, ended a long-standing method for smaller shareholders to post information and arguments related to their proposals ahead of shareholder meetings. In revising its guidance, the SEC expressed concern that smaller shareholders had been misusing the process to generate publicity. In response to the new guidance, As You Sow announced the launch of the Proxy Open Exchange, a website that catalogues solicitations for proxy proposals. Notably, however, the solicitations on the Proxy Open Exchange will not be part of the company’s record and will serve primarily as an informational exchange among shareholders and proponents. Additionally, the Interfaith Center on Corporate Responsibility has compiled a list of voluntary solicitations not filed on EDGAR, which it makes available on its website. Companies should consider monitoring these websites to stay alert for any potential shareholder concerns or activism developments that may no longer be reflected on the company’s EDGAR page.

State AGs Warn Credit Agencies Over ESG-Related Downgrades

On April 22, 2026, Republican attorneys general (the “AGs”) from 23 states sent a letter to Fitch Ratings, Moody’s Investors Service, and S&P Global Ratings arguing that the rating agencies have engaged in downgrades of fossil-fuel companies and jurisdictions based on “highly speculative” ESG predictions and goals. The term “ESG,” as used in the letter, relates primarily to predictions and goals regarding global emissions reduction targets (e.g., net zero goals). The downgrades, according to the letter, were in contradiction of the agencies’ stated methodologies, reflect undisclosed material conflicts of interest, and may have violated federal and state laws, including federal securities laws, anti-trust laws, and state consumer protection laws. The AGs contend that these downgrades have harmed fossil-fuel producing states and consumers consequently facing higher gas prices, and demand several actions from the agencies, including (1) explaining or reversing “ESG-driven” downgrades, (2) withdrawing from or disclosing ESG commitments within 60 days, (3) publishing revised oil and gas sector methodologies that remove or time limit ESG transition risk factors, (4) ceasing to offer ESG services or disclosing them as a conflict of interest, and (5) certifying that internal controls have been reviewed and updated to prevent ESG from influencing credit determinations. Further, the letter requests that the agencies respond to 27 questions within 45 days and warns that failure to take the requested actions will inform the AGs’ assessment of whether enforcement action in coordination with the U.S. Department of Justice is warranted. This letter is the latest front of an anti-ESG movement led by Republican politicians that has targeted institutional investors, proxy advisory firms, and companies for sustainability and climate-related policies and initiatives. V&E will continue to monitor anti-ESG developments.

ISS and Glass Lewis Sue Indiana and Kansas Over New Disclosure Laws

In April 2026, Institutional Shareholder Services Inc. (“ISS”) and Glass, Lewis & Co. (“Glass Lewis”), the two largest U.S. proxy advisory firms, filed separate lawsuits against the attorneys general of Indiana and Kansas to challenge recently enacted laws that, according to the proxy advisors, are unconstitutional and impose “onerous” disclosure obligations.[1] The laws, which both go into effect on July 1, 2026, require proxy advisors to make significant disclosure about voting recommendations that conflict with the recommendations made by an issuer’s management. The laws are similar to the 2025 Texas law that is currently blocked by a federal judge as part of ongoing litigation among the Texas attorney general, ISS, and Glass Lewis. In the new lawsuits, ISS and Glass Lewis argue, among other things, that the Kansas and Indiana laws violate their freedom of speech rights, are unconstitutionally vague, and violate the Dormant Commerce Clause. Further, the proxy advisors contend that the laws would, among other things, force them to make statements that are false and misleading, as well as impose a severe financial hardship. Both ISS and Glass Lewis ask for preliminary injunctions blocking the respective laws from taking effect. The lawsuits have been filed amid various U.S. states advancing legislation to place similar requirements on proxy advisory firms and follow the U.S. Department of Labor’s release of guidance on the application of ERISA’s fiduciary requirements to proxy advisors. V&E will continue to closely monitor these developments.

Delaware Supreme Court Dismisses Lawsuit Challenging Advanced Notice Bylaws

On April 29, 2026, the Delaware Supreme Court (the “Supreme Court”) affirmed the dismissal of consolidated stockholder challenges to advance notice bylaws adopted by AES Corporation and Owens Corning. The dispute arose from two stockholders seeking declaratory and injunctive relief against bylaw amendments adopted by the companies in 2023 following the SEC’s adoption of Rule 14a-19 (commonly known as “the universal proxy rule”) and subsequent guidance. The challenged bylaws included exclusive-means nomination provisions, broad acting-in-concert and “daisy chain” provisions, chair-disqualification powers, and ownership and relationship disclosure requirements. The plaintiffs alleged that the companies’ boards breached their fiduciary duties by adopting bylaws purportedly designed to deter stockholder nominations. But neither plaintiff intended to run a proxy contest or could identify any other stockholder who did. The Delaware Court of Chancery dismissed the action as unripe, as no stockholder had attempted, threatened, or been chilled from making a nomination under the challenged bylaws. The Supreme Court agreed, rejecting the stockholders’ theory that the bylaws would have a deterrent effect on stockholder nominations. The Supreme Court explained that the bylaws imposed procedural and disclosure obligations, rather than the kind of automatic economic penalties (like poison pills) that have supported deterrence-based ripeness in prior cases. Nevertheless, the Supreme Court cautioned that it did not hold that an equitable challenge to the adoption of advance notice bylaws can never be ripe absent a rejected nomination. Until a “genuine, extant” controversy arises, stockholders were not left without recourse, as they retain the ability to vote against directors, propose bylaw amendments, wage “withhold” campaigns, use inspection rights pursuant to Delaware law, and, if a nomination is ultimately attempted and rejected, pursue expedited as-applied equitable review at that time.

Illinois Climate Superfund Bill Fails to Advance

Illinois’s Climate Change Superfund Bill — a law that would have required fossil fuel companies to pay for climate change damages — has failed to advance. Thus, for the time being at least, Illinois will not follow in the footsteps of New York and Vermont, where similar laws have been promulgated (although both are currently subject to challenge in federal court). Illinois’ bill would have required fossil fuel producers and oil refiners found to have emitted at least one billion tons of greenhouse gases from 2000 through 2024, to pay into a state fund, which would pay for climate adaptation projects. Despite support from various environmental advocates — and some traction nationally — several companies opposed the bill, including the American Petroleum Institute, the Illinois Chamber of Commerce, and the Illinois Pipe Trades Association. It is likely that, should the bill have passed, it would have been challenged by the Trump administration. In April 2025, President Donald J. Trump issued Executive Order 14260, Protecting American Energy From State Overreach, which directed federal agencies to eliminate state impediments to the production, development and use of traditional energy resources. The Executive Order specifically targeted New York and Vermont’s climate superfund laws. Illinois House majority leader Robyn Gabel has suggested that the Illinois Legislature will hold committee hearings on the bill this summer and seek to pass it in next year’s session. Companies potentially on the hook as a result of climate superfund laws, such as those passed in New York and Vermont, or introduced in states such as Illinois and New Jersey, should carefully watch developments in this space, particularly the outcome of the pending federal challenges.

¹ISS brought suit against Indiana Attorney General Todd Rokita on April 13, 2026, and Kansas Attorney General Kris Kobach on April 29, 2026, while Glass Lewis filed a complaint against Mr. Rokita on April 30, 2026.

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.