Month: September 2024

Corporate GovernanceESGLitigation

California legislature tinkers with climate disclosure laws

In 2023, when California Governor Gavin Newsom signed into law two bills related to climate disclosure—Senate Bill 253, the Climate Corporate Data Accountability Act, and SB 261, Greenhouse gases: climate-related financial risk—he questioned whether the implementation deadlines in the bills were actually feasible. (See this PubCo post.) So even as the bills were being signed, it looked like they might be in for an overhaul at some point—sooner rather than later.  In July this year, Newsom proposed, along with several other changes, a delay in the compliance dates for each bill until 2028. (See this PubCo post.) However, one of the bills’ key sponsors opposed the administration’s proposal, telling Politico that the proposal didn’t reflect an agreement with lawmakers: the “administration really wants additional delays for the disclosures. And we don’t agree on that.” Apparently, Newsom’s proposal did not go anywhere. Then, at the end of August, the California Legislature passed a bill, SB 219, introduced by two sponsors of SB 253 and SB 261, that seeks to meet the Governor part way. But many may view it as pretty weak tea: while the bill gives the California Air Resources Board, which was charged with writing new implementing regulations, a six-month reprieve in the due date, for reporting entities, there is no compliance delay in commencement of reporting—it’s a big goose egg. Newsom has until the end of September to veto or sign the bill; if he does neither, the bill will become law.

/ September 9, 2024
Accounting and AuditingCorporate GovernanceSecurities

Center for Audit Quality comes to the rescue for audit committees tasked with AI oversight

In this 2023 article in Fortune, a survey of 2,800 managers and executives conducted by management consulting firm Aon showed that business leaders “weren’t very concerned about AI….Not only is AI not the top risk that they cited for their companies, it didn’t even make the top 20.  AI ranked as the 49th biggest threat for businesses.” Has “the threat of AI been overhyped,” Aon asked, or could it be that the “survey participants might be getting it wrong”? If they were, it wasn’t for long. Fast forward less than a year, and another Fortune article, citing a report from research firm Arize AI, revealed that 281 of the Fortune 500 companies cited AI as a risk, representing “56.2% of the companies and a 473.5% increase from the prior year, when just 49 companies flagged AI risks. ‘If annual reports of the Fortune 500 make one thing clear, it’s that the impact of generative AI is being felt across a wide array of industries—even those not yet embracing the technology,’ the report said.”  This widespread recognition of the potential risks of genAI will likely compel companies to focus their attention on risk oversight, and that will almost certainly entail oversight by the audit committee.  To assist audit committees in that process, the Center for Audit Quality has released a new resource—an excellent new report, Audit Committee Oversight in the Age of Generative AI.

/ September 5, 2024
ESGLitigation

Are you ready for anti-anti-ESG?

You all remember the reams of anti-ESG bills that poured out of some of the states, not to mention the U.S. House?  According to Reuters, some “states have unleashed a policy push to punish Wall Street for taking stances on gun control, climate change, diversity and other social issues, in a warning for companies that have waded in to fractious social debates.” A 2022 Reuters analysis found that there were at least 44 bills or new laws in 17 states “penalizing such company policies, compared with roughly a dozen such measures in 2021.” (See this PubCo post.) In 2023, an article in Institutional Investor reported, 198 pieces of legislation were introduced, 23 laws passed and 6 resolutions adopted. And in 2024, the article reports, state legislators wrote 161 bills and resolutions in 28 states for consideration, with six bills passed so far. (See this PubCo post.)  Recently, however, ESG proponents have begun to employ a more aggressive strategy regarding anti-ESG legislation. They’re now playing in the same sandbox as the anti-ESG groups, pursuing anti-anti-ESG litigation—premised in part on…wait for it…the First Amendment, one of the favored legal strategies, of course, of the anti-ESG groups. What’s good for the goose is good for the gander?  What goes around comes around? As the call, so the echo? A couple of cases may illustrate the phenomenon. Will we see more?

/ September 4, 2024
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