Environmental, social, and governance (ESG) investing in the United States remains at the center of a sustained legal and regulatory debate. That debate is not confined to a single forum or authority. Rather, it is playing out simultaneously across federal agencies, the US Congress, courts, and, critically, states. For asset managers, institutional investors, sponsors, and other market participants, this regulatory environment presents both material risk and strategic opportunity.

At its core, the current US ESG environment reflects two competing views. One frames ESG factors as relevant to long-term value creation because they are material to investment performance and responsive to investor concerns about issues such as climate change, workforce practices, and governance. The other views ESG considerations as ideologically driven, disconnected from wealth creation, and potentially inconsistent with fiduciary obligations. These opposing perspectives are driving many of the legal challenges now confronting ESG-related investment strategies.

However, despite this landscape of debate, this environment can still present opportunities; the challenge is finding ways to navigate those opportunities with less risk. For example, for sophisticated managers and institutional investors, there can remain opportunities to reach those US investors seeking strategies that incorporate ESG, so long as they are tied to financial returns and risk management and structured to withstand scrutiny across overlapping and, at times, conflicting federal and state regimes.

This Insight, based on a presentation from our Global ESG Trends webinar series, examines four areas where US regulatory and litigation pressure has been most pronounced.

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