Proxy advisers notch 3rd legal win as Indiana anti-ESG law blocked

A third US state has failed to enforce anti-ESG disclosure rules against proxy advisers ISS and Glass Lewis, reinforcing First Amendment protections for shareholder voting recommendations.

A federal judge blocked an Indiana law requiring proxy advisers to disclose financial analyses when opposing management, handing Institutional Shareholder Services and Glass Lewis their third court victory against Republican-backed anti-ESG rules. US District Judge Matthew Brookman granted the preliminary injunction late Friday, halting enforcement of the law that was set to take effect July 1.

"These rulings safeguard core First Amendment principles by rejecting speaker and viewpoint discrimination," a Glass Lewis spokesperson said in an email. "They ensure we can continue to deliver the objective research that our clients have come to expect."

The Indiana law would have required ISS and Glass Lewis to provide a "written financial analysis" when recommending votes against company management or disclose that no such analysis was conducted. Supporters said the measure was needed to keep proxy advice focused on financial outcomes. Brookman agreed with the firms' arguments that the law amounted to "viewpoint discrimination" because it imposed burdens only when the proxy firms disagree with management — a finding that echoes rulings in two other states.

The decision marks the third time in roughly 12 months that federal courts have blocked similar state-level restrictions. A Texas court granted a preliminary injunction in August 2025, and a Kansas court followed with its own injunction earlier this month. In each case, judges cited First Amendment concerns with laws that single out proxy adviser recommendations that diverge from company management positions.

ISS praised the ruling in a statement, calling the Indiana law "an unconstitutional exercise of power over the free market." The firm noted that the three consecutive injunctions show "states cannot seek to impose onerous obligations on proxy advisors simply for making recommendations that do not align with company management."

The legal battles are far from over. ISS and Glass Lewis have also sued to block a similar rule in Kentucky, and the Texas and Kansas cases remain pending in federal courts. Separately, Florida has sued both firms over consumer protection and antitrust allegations, which they deny. ISS has vowed to fight similar suits in four other states.

Republican lawmakers in multiple states have targeted proxy advisers over their growing influence on corporate governance, particularly on environmental, social and governance topics such as workforce diversity and climate change. The two firms recommend how investors should vote at corporate annual meetings, and their sway over shareholder resolutions has drawn criticism from business groups and conservative politicians who argue the advice prioritizes political agendas over financial returns.

For asset managers and public companies that rely on ISS and Glass Lewis recommendations, the string of court victories removes a layer of regulatory uncertainty. The rulings suggest that state-level efforts to impose disclosure mandates on proxy advisers face significant constitutional hurdles, potentially limiting the scope of the anti-ESG campaign that has gained traction in Republican-led states since 2023.

This article is for informational purposes only and does not constitute investment advice.