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On March 6, 2023, a divided SEC, and based on a 3-2 vote, adopted its final climate change disclosure guidelines. The guidelines as adopted are significantly watered down from the draft guidelines originally proposed; for example, the final guidelines do not require  disclosure of so-called Scope 3 greenhouse gas emissions (GGE). As discussed below, the new guidelines will almost certainly face legal challenge. The SEC’s March 6, 2024, press release about the new rules can be found here. The actual rules themselves can be found here. An SEC fact sheet about the new rules can be found here.Continue Reading SEC Adopts Final Climate Change Disclosure Guidelines – What Next?

In my recent wrap-up of the top D&O stories of 2023, I noted that one of the key developments during the past year was California’s adoption of new climate change disclosure requirements, which were enacted at a time when there was the added prospect that the SEC would finally release its own climate change disclosure guidelines by April 2024. While the California requirements have not yet been implemented and the final SEC disclosure guidelines have not yet even been released, there are growing signs that these climate change-related disclosure requirements may face significant hurdles and challenges.

It is not news that the SEC disclosure guidelines, whenever they are finally released, likely will face significant legal challenges, as I have previously noted on this site (here). However, this past week, in a Congressional hearing before a House Financial Services subcommittee, as reported in a January 18, 2024, Law360 article (here), spokespersons for conservative and business interests reiterated their belief that the SEC’s climate change disclosure guidelines, as proposed, reflect “several deficiencies,” and likely will face significant legal challenges.Continue Reading Climate Change Disclosure Requirements Face Hurdles and Challenges

Ever since March 2022, when the SEC released its proposed climate change disclosure guidelines, observers and commentators have watching and waiting to see when the agency would release its final disclosure rules. But in the meantime, important developments elsewhere may mean that many companies may face climate change-related disclosure requirements regardless of the shape the SEC’s final guidelines take. As I noted (here), in July, the European Union adopted its first set of sustainability reporting standards, which will have extensive impact both within and outside the EU. Now, the California legislature has adopted two far-reaching climate-related disclosure bills, which could affect thousands of companies – both public and private, and both within and outside California – and that together could, as the Wall Street Journal put it, represent “among the biggest changes in corporate disclosure in decades.”Continue Reading California Enacts Far-Reaching Climate-Related Disclosure Requirements

In what it calls the “world’s first” of its type, the environmental advocacy group ClientEarth has filed a shareholder derivative action against the board of Shell plc, claiming that the company’s directors have failed to take sufficient steps to protect the company from the future impacts of climate change. The action seeks to compel the board to “strengthen its climate transition plans, in the best interests of the company in the long term.” A copy of ClientEarth’s February 9, 2023 press release about the new lawsuit can be found here. The group’s statement of FAQ’s can be found here.Continue Reading Advocacy Group Sues Shell’s Board for Insufficient Climate Change Action

As I discussed at the time (here), in March 2022, the SEC published proposed climate-related disclosure guidelines. The agency’s proposal is now in the public comment period, and it remains to be seen in what form the guidelines will be put into effect. However, it seems probable that that the guidelines will be implemented in some form, despite concerns expressed in public comments so far. If the rules are put into effect in some form close to the initial proposal, there will be a risk that claimants may seek to rely on the guidelines in connection with future corporate and securities lawsuits. A detailed and interesting September 12, 2022 memo from the Cleary Gottlieb law firm (here) discussed the possibility that the climate change disclosure guidelines could give rise to a host of potential future litigation risks. (Hat tip to the TheCorporateCounsel.net blog for the link to the law firm memo.)
Continue Reading Will Corporate and Securities Litigation Follow SEC Adoption of Climate Disclosure Guidelines?

I was struck by the recent statements of Chubb CEO Evan Greenberg quoted an insurance industry publication that a colleague circulated to me last week. In the article, Greenberg said that when it comes to ESG commitments, many companies – particularly insurance companies – may be over-promising. What made Greenberg’s remarks particularly interesting to me was his suggestion that companies’ commitment to net-zero goals and other lofty-sounding climate aspirations could lead to shareholder lawsuits. It is worth thinking about this litigation possibility in the context of current regulatory action focused on so-called “greenwashing” in the investment fund industry. In both cases, the concern is that companies may tried to take on an ESG aura that the actual facts may not support.
Continue Reading Will Companies’ ESG Goals Lead to Shareholder Litigation?

On March 21, 2022, the SEC, by a 3-1 vote along party lines, approved the issuance of proposed rule changes that, if adopted, would require all registered companies, including foreign issuers, to make specified disclosures related to climate change and greenhouse gas emissions in their registration statements and in annual SEC filings (such as reports on Form 10-K). As discussed below, the proposed disclosure requirements have already provoked significant commentary. The SEC’s 534-page proposed rule release can be found here. The SEC’s fact sheet about the proposed rules can be found here. The SEC’s March 21, 2022 press release about the proposed rules can be found here.
Continue Reading Thinking About the SEC’s Proposed Climate Change Disclosure Requirements

As long-time readers of this blog know, one of the long-range concerns in the D&O insurance industry is the possible exposures of corporate directors and officers to liability claims arising from climate change (as discussed most recently here). In the following guest post, attorneys from the Legalign Global Alliance member firms take a comprehensive look at the climate change-related risks and exposure that corporate directors and officers may face, as well as at the climate change-related D&O claims developments in a variety of different countries. A version of this article previously was published as a Legalign Global client alert. I would like to thank the authors for allowing me to publish their article as a guest post on this site. I welcome guest post submissions from responsible authors on topics of interest to this blog’s readers. Please contact me directly if you would like to submit a guest post. Here is the authors’ article.
Continue Reading Guest Post: D&O Exposures to Climate Change Risk

In a recent post in which I reviewed recent legal developments in Australia, I discussed the growing possibilities for future climate change-related D&O claims. A recent paper highlights the extent of these D&O claim risks in the United States. The October 2021 paper, published by the Commonwealth Climate and Law Initiative and entitled “Fiduciary Duties and Climate and entitled “Fiduciary Duties and Climate Change in the United States,” discusses how evolving understandings of climate change has “changed the relevance of climate change to the governance of corporations,” with important implications for the fiduciary duties of directors and officers. The paper discusses how in the current legal environment in the U.S. a board’s failure to adequately regard climate change-related issues could lead to potential litigation and liability. A copy of the full paper can be found here, and an executive summary of the paper can be found here.
Continue Reading Climate Change-Related Breach of Fiduciary Duty Lawsuits?

An Australian Federal Court class action lawsuit alleging that the Australian Federal Government failed to disclose to investors the climate change risks associated with the government’s sovereign bonds has survived in part an attempt by the government to have the action dismissed. In an October 8, 2021 Judgment (here), a Federal Court of Australia Judge “declined to strike-out” the applicant’s claim based on allegations of misleading or deceptive conduct, while agreeing with the government to “strike-out” others of the applicant’s claims, as discussed below. The court’s rulings in this case arguably represent something of a milestone in the development of climate change-related litigation.
Continue Reading Australian Bond Climate Change-Related Disclosure Class Action to Proceed