Five states — Tennessee, Oklahoma, Indiana, Kentucky, and Kansas — enacted proxy advisor disclosure laws during the 2026 legislative sessions, making proxy advisor regulation the most common ESG-related policy approach enacted this year. Kentucky and Kansas enacted their laws after Republican-controlled legislatures overrode vetoes from Democratic governors.
Proxy advisory firms, including Institutional Shareholder Services (ISS) and Glass Lewis, analyze shareholder proposals and provide voting recommendations to institutional investors, such as pension funds and asset managers. Several Republican-led state governments adopted new disclosure requirements intended to inform investors when recommendations rely on ESG or other nonfinancial considerations rather than financial analysis.
Tennessee's HB 2476 requires a proxy advisory firm providing advice to public pension plans to "provide a financial analysis supporting every recommendation that the proxy advisory firm makes to the pension plan on a shareholder proposal that differs from the company management's recommendation."
Kansas' SB 375 requires disclosures when a proxy advisor recommends a vote against company management. The law defines a written financial analysis as one that "analyzes the expected short-term and long-term financial benefits and costs to the company" and "concludes what vote or course of action is most likely to positively affect shareholder value."
The laws have also prompted federal court challenges in Kansas, Indiana, and Kentucky.
The 2026 proxy advisor laws represent a more specific approach to proxy voting than much of the ESG legislation enacted in earlier years. Previous laws often addressed proxy voting through broader sole fiduciary requirements governing public funds. This year's laws directly regulate proxy advisory firms and the recommendations they provide to investors.
Supporters of the laws argue the disclosure requirements improve transparency because they inform investors when voting recommendations rely on nonfinancial considerations rather than financial analysis. ISS and Glass Lewis say the laws violate the First Amendment because they impose disclosure requirements based on the viewpoint expressed in their recommendations.
The legal challenges these laws are facing will determine how far states can regulate proxy advisors and how states pursue similar legislation in future sessions.
The recent lawsuits build on a broader legal challenge to state regulation of proxy advisors.
In July 2025, ISS and Glass Lewis sued Texas over SB 833, which imposed disclosure requirements when proxy voting recommendations relied on certain nonfinancial considerations, including ESG and diversity, equity, and inclusion (DEI) factors. U.S. District Court for the Western District of Texas later issued a preliminary injunction blocking enforcement of the law against the firms while the litigation continues.
The federal government also increased its scrutiny of proxy advisors later that year. In December 2025, President Donald Trump (R) issued an executive order directing the Securities and Exchange Commission (SEC) to review rules governing proxy advisors, including their considerations of ESG and DEI factors.
On June 24, 2026, U.S. District Judge Holly L. Teeter of the U.S. District Court for the District of Kansas — a Donald Trump (R) appointee — issued preliminary injunctions preventing Kansas from enforcing the Proxy Advisory Transparency Act (SB 375) against ISS and Glass Lewis while the litigation proceeds. Judge Teeter concluded the firms were likely to succeed on their claims that the law regulates speech based on viewpoint and therefore likely violates the First Amendment.
On June 26, U.S. District Judge Matthew Brookman of the U.S. District Court for the Southern District of Indiana — a Joe Biden (D) appointee — granted preliminary injunctions preventing Indiana from enforcing HB 1273 against ISS and Glass Lewis pending a final decision. Judge Brookman likewise concluded the firms were likely to succeed on their First Amendment claims.
ISS and Glass Lewis have also challenged Kentucky's law in the U.S. District Court for the Eastern District of Kentucky, where the litigation remains pending. The firms continue to litigate a similar challenge to Texas' 2025 proxy advisor law.
The Kansas and Indiana rulings are the second and third preliminary federal court injunctions against state proxy advisor disclosure laws. Together, the cases have become an early test of how far states may regulate proxy advisors' recommendations under the First Amendment while broader debates over ESG investing continue.
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