Sustainable Finance Law: USA

In the United States, a company's decision to engage in sustainable finance is currently voluntary. Companies are generally free to – and do – consider the reputational and financial benefits of doing a sustainable finance transaction when deciding whether to enter or participate in the market. There are industry guidelines for green, social and sustainable bonds and loans and sustainability-linked bonds (SLBs) and loans (SLLs), as published by the International Capital Market Association (ICMA) and the Loan Syndications and Trading Association (LSTA). While these are just that – guidelines – they are increasingly being viewed in the US sustainable finance market as standards or expectations. In addition to market practices and guidelines, the US federal government has introduced rules and regulations specifically related to ESG matters, but until those rules are formalised, existing securities laws – which tend to focus around disclosure – will continue to govern sustainable finance.

Recent trends in sustainable finance in the United States have in part been driven by the current political environment, with lawmakers in some states moving forward to regulate and promote sustainable finance and climate change initiatives and lawmakers in other states taking steps to restrict ESG investments by government bodies and potentially penalise market participants who disfavour companies that do not engage in positive climate change and energy transition steps. The current political environment has resulted in increased scrutiny of ESG investments and sustainable finance products, resulting in an optimistic, but cautious, mood for sustainable finance investors and issuers.

We provide our clients with market-leading advice that enables them to navigate complex, broad-ranging and rapidly evolving ESG issues in an increasingly connected, global business environment. For updates on ESG issues affect business globally, see our blog: Eye on ESG.