In recent years, companies have made a point of marketing themselves as caring about the environment. Even major airlines have planned dates for becoming “carbon neutral.” A stated commitment to environmental, social and governance (ESG) goals started as a way to attract both customers and investors who have become more conscientious about where they put their money.
However, the Securities and Exchange Commission (SEC) is holding companies and investment funds accountable when they can’t back up those claims. Some have discovered the high cost of misrepresenting their practices. Companies as varied as Goldman Sachs, BNY Mellon, Fiat/Chrysler and BP have faced enforcement actions.
Most SEC actions, which have multiplied in recent years, involve environmental claims around sustainability and carbon neutrality. A relatively new term, “greenwashing,” has even been coined to describe “exaggerating the extent to which products or services take into account environmental and sustainability factors…. or make unsupported claims about taking environmental or sustainability actions.”
The SEC has a task force that’s tasked with identifying “potential violations including material gaps or misstatements in issuers’ disclosure of climate risks under existing rules, and disclosure and compliance issues relating to investment advisers’ and funds’ ESG strategies.” Because it’s located within the SEC’s Division of Enforcement, it has the authority to take legal action against violators.
Any size or type of company can be a target
The targets of many of these actions have been in the energy and financial sectors (the latter because of their investment funds), companies of all sizes in a variety of industries have faced ESG enforcement actions – some for making misleading or inaccurate claims about how much they recycle. Not only can SEC actions be financially costly, but they can harm a company’s reputation.
The SEC is demonstrating that a companies’ claims about their commitment to sound environmental practices can’t just be feel-good language. These claims must be accurate and provable. If you find yourself under SEC investigation for alleged “greenwashing” or any other wrongdoing, it’s critical that you get experienced legal guidance as soon as possible.
