Boards are confronting a more complex management liability environment as environmental, social and governance (ESG) policies attract challenges from opposing directions.
Companies, nonprofits and universities may face pressure from supporters to maintain ESG and diversity initiatives while governments and other stakeholders push them to scale those programs back, according to Nelson T. Kefauver (pictured), head of financial and professional lines, North America, Intact Specialty Solutions.
Public commitments can create an additional source of exposure when organizations fail to deliver on their stated goals.
“As an organization, you can face challenges both for doing too much and for doing too little,” Kefauver said. “You’ll have some stakeholders who want you to be very pro-ESG. That might be donors if you’re a nonprofit or a school, or your students, faculty, employees, and others.”
This tension marks a significant change from four or five years ago, when organizations were under greater pressure to introduce ESG and diversity, equity and inclusion programs. Some moved quickly and made commitments they could not substantiate, Kefauver said.
The resulting disputes are not exclusively political or philosophical. Stakeholders may compare public statements against an organization’s actual conduct, including its environmental targets and hiring objectives.
“You said you were going to recycle this much. You said you were going to hire this percentage of a certain diverse group,” Kefauver said. “You stated it publicly and set up all these groups, and then you actually didn’t go forward with that.”
Nonprofits and universities can be particularly exposed because of their dependence on public funding, their visibility and the importance of their reputations to long-term survival. Funding creates an especially powerful lever; a nonprofit or university that loses 20% or 30% of its government support could be forced to reduce programs or lay off employees, Kefauver said.
One stark example of this is the Department of Education’s scrutiny of the PhD Project, a nonprofit focused on increasing diversity in business schools, and universities associated with the organization.
In March 2025, the department investigated 45 universities over their partnerships with the PhD Project, alleging that the nonprofit improperly restricted participation by race. By February 2026, 31 institutions had agreed to end those relationships, although some, including MIT, did not admit wrongdoing.
The PhD Project said it remained committed to increasing diversity among business-school faculty, according to Associated Press reporting.
The enforcement environment remains unsettled. Federal judges blocked the department’s broader anti-DEI guidance in 2025, and the administration later dropped its appeal. Kefauver also cited federal investigations involving race-based scholarships as examples of how government action can pressure institutions to change established programs.
However, the investigations and resulting settlements show how regulatory pressure can prompt institutions to change programs.
The risks do not necessarily make ESG initiatives untenable. Organizations with longstanding social or environmental missions may decide to continue pursuing them, but boards need to understand and document those decisions. “Making sure that your public disclosures are supportable is absolutely critical,” Kefauver said. “If part of your mission as a nonprofit is to do certain things with diversity, and you say you’re going to do them, you want to make sure that there’s actually action behind what you say.”
Board minutes and other records should establish how an organization selected its level of ESG activity, evaluated the legal implications and determined how much risk it was prepared to accept. Coordination among leadership, legal advisers and risk management is central to that process.
Insurance programs should also reflect the organization’s profile and potential sources of litigation. D&O and employment practices liability policies may respond differently, particularly when discrimination allegations are involved. Some D&O policies contain discrimination exclusions, potentially leaving an organization without coverage unless it has also purchased appropriate employment practices protection.
Coverage analysis should extend beyond exclusions and policy language to the adequacy of limits. An institution’s size, public profile and reliance on federal funding can all influence the amount of insurance required.
“No matter what you do, there’s risk,” Kefauver said. “If you’re going to go heavy ESG, light ESG, or non-ESG, there is now risk from all angles.”
Board members must consider their own exposure alongside that of the institution, Kefauver added, because claims against an organization can also name individual directors and officers.
Long-term decisions will remain difficult as political priorities shift between administrations. Organizations can strengthen their position by aligning their mission and leadership objectives with legal advice, documented governance processes and insurance protection.
“The biggest piece is that coordination of leadership, legal, and risk management,” Kefauver said.
