What is ESG Reporting, and How is New York Regulating Its Use?
Reyna Lee
ELR Staffer, (Class of 2026)
“ESG” is a set of metrics that companies use to evaluate their impact on the environment and society by measuring their environmental, social, and governance practices. Since ESG reports use tangible data and metrics, they can inform company and investor decision-making. Under the “environmental” prong, companies report on environmental factors such as their greenhouse gas emissions, levels of ground pollution, and use of natural resources such as water and land. Companies report on their “social” impact by evaluating how they manage their employee development and labor practices, as well as how they impact people, culture, and communities. Lastly, companies assess their “governance” by looking at organization direction, shareholder rights, board diversity, and executive compensation.
ESG differs from sustainability and corporate social responsibility because it provides a structured framework for measuring and disclosing a company’s ESG performance. Mandatory frameworks like the Corporate Sustainability Reporting Directive (CSRD) adopted by the European Commission require companies to disclose ESG performance metrics following established guidelines. The United States relies on regulations from the SEC and voluntary reporting frameworks such as the Global Reporting Initiative (GRI), The Sustainability Accounting Standards Board (SASB), and the Task Force on Climate-related Financial Disclosures (TCFD). For example, the TCFD recommendations on climate-related financial disclosures are structured around the four themes of governance, strategy, risk management, and metrics and targets. “isk management” recommends that the organization disclose how it identifies, assesses, and manages climate-related risks. Metrics and targets” recommends that the organization disclose the metrics and targets it uses to assess and manage climate-related risks and opportunities.
Companies significantly impact society and the environment. In recent years, public sentiment has reflected a desire for companies to be more transparent about their ESG factors. By participating in voluntary ESG reporting, companies can demonstrate their commitment to go beyond mandated ESG reporting requirements, which is attractive to socially and environmentally conscious investors.
- How is New York State regulating ESG reporting through legislation?
There is pending legislation in New York State both for and against using ESG guidelines to make government-regulated decisions.
New York Senate Bill 9758 was Introduced by Democratic Senator James Sanders in May 2024. The bill proposes the “climate safe and responsible bank procurement act,” which would create standards for purchasing bank services. This proposed bill requires the state procurement council to establish guidance requiring state agencies to consider specific ESG criteria when purchasing banking services by December 31, 2025, including whether a bank: (1) discloses its greenhouse gas emissions and its clean energy supply financing ratio; (2) has policies that bar support for coal projects, cover the transition away from new fossil fuel projects, and divest from existing fossil fuel projects; and (3) has a plan for achieving net zero carbon emissions by 2050.
New York Senate Bill 5437 was introduced by Democratic Senators Peter Harkham and Andrew Gounardes in March 2023. The bill creates climate-related financial reporting standards for corporations that are authorized to operate in New York, are subject to the supervision of the Department of Financial Services, and had annual gross revenues of at least $500 million in the prior calendar year. This proposed bill requires these companies to prepare an annual climate-related financial risk report that it must submit to the secretary of state and make publicly available. The climate-related financial risk report must disclose the company’s (1) climate-related financial risk pursuant to the recommended framework and disclosures contained in the final report of the task force on climate-related financial disclosures or any successor to the company” and (2) measures adopted to reduce and adapt to climate-related financial risk disclosed according to the previous factor.
New York Assembly Bill 4090 was introduced by Republican Assemblymember Samuel Pirozzolo in 2023. The bill prohibits the comptroller from using ESG criteria to determine which companies and funds to invest in from the state pension fund. The bill was not passed during the 2023 legislative session, so it has been carried over into the 2024 legislative session and re-introduced as NY S06472.
