SEC announced the creation of the climate and Environmental, Social, and Governance (“ESG”) Task Force in March 2021. The Task Force was created to identify misconduct in ESG-related disclosures and any material gaps or misstatements in issuers’ disclosure of climate risks.
Since the creation of the Task Force, SEC has increased its enforcement actions relating to ESG disclosures. In recent months, there has been a flurry of activity, the latest being SEC’s investigation of Goldman Sachs. SEC announced that it is investigating the Bank’s mutual-funds business and looking into whether some investments align with the ESG metrics promised in their marketing materials.[1]
In May 2022, SEC announced that Bank of New York Mellon Corp. (BNY Mellon) will pay a sum of $1.5 million to settle allegations of falsely implying that some of their mutual funds had undergone an ESG quality review when in fact the bank did not always scrutinize ESG factors to evaluate the funds.[2]
A month before, in April 2022, the SEC charged Vale S.A., a Brazilian mining company of making false and misleading claims about the safety of their dams through its ESG disclosures. One of the Company’s dams’, Brumadinho, collapsed in 2019, killing 270 people and led to a loss of more than $4 billion in Vale’s market capitalization. SEC’s charges included Vale’s manipulation of dam safety audits and misleading the investors through Company’s ESG disclosures, including voluntary sustainability reports and ESG-related presentations.[3]
Many investors rely on the ESG disclosures to make informed investor decisions, and SEC’s recent endeavors leave no doubt that it is increasingly scrutinizing disclosures which touch upon climate and other environmental factors to ensure their correctness and completeness.
If you’ve invested in ESG products and have questions, Lowey Dannenberg’s securities attorneys may be able to help. Please feel free to contact us using the form on this page, or by emailing Christian Levis (clevis@lowey.com), Andrea Farah (afarah@lowey.com) or this post’s author Radhika Gupta (rgupta@lowey.com).
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[1] https://www.bloomberglaw.com/bloomberglawnews/esg/XCS9IFSG000000?bna_news_filter=esg
[2] https://www.bloomberglaw.com/bloomberglawnews/esg/X1ST32KO000000?bna_news_filter=esg
[3] https://www.sec.gov/news/press-release/2022-72