I hope many readers saw and read my recent post “What to Watch in the World of D&O.”  A few days ago I recorded a podcast as part of the Rising Edge Ltd’s podcast series in which I discuss several of the themes raised in the “What to Watch” post. In the podcast recording, I

In my recently published survey of the top topics in the world of directors’ and officers’ liability and insurance, and in connection with my discussion of ESG issues, I briefly mentioned the lawsuit that was filed last week against directors and officers of Starbucks in connection with the company’s “Diversity, Equity, and Inclusion” (DEI) policies. Because there are a number of notable aspects of this lawsuit, it is worth taking a closer look at the suit. As discussed below, the lawsuit represents yet another instance of anti-ESG backlash and illustrates how companies taking the initiative on ESG issues could incur scrutiny and litigation risk. A copy of the recent complaint can be found here and a copy of the plaintiff’s August 31, 2022 press release can be found here.
Continue Reading Starbucks Execs Hit With Suit Alleging the Company’s DEI Policies Violate Civil Rights Laws

Readers of this blog are well aware that “ESG” (whatever that term may mean) is one of the hot topics in the financial and business sectors. Companies face scrutiny and pressure to show that they are making progress on ESG goals. The SEC has established an ESG task force and proposed climate change disclosure rules. Now, as if all of that were not enough, political reaction is giving rise to an ESG backlash. As detailed in two recent memos from the Morgan Lewis law firm (here and here), as many as 17 states have now adopted “anti-ESG” state legislation that would limit the ability of state governments, including public retirement plans, to do business with entities “boycotting” industries based on ESG criteria or considering ESG factors in their investment processes.
Continue Reading And Now, The ESG Backlash

The hot topic in the financial press, the corporate world, and the legal arena these days is “ESG.” This portmanteau expression – ESG — is meant to encompass a plethora of diverse and unrelated concepts, ideas, and concerns. The reality is that it is hard to say simply what “ESG” means; and not just “ESG,” but each of the three pillars, E, S, and G, are subject to the same definitional imprecision. Yet everyone continues to act as if “ESG” is a known, specific, and identifiable thing, that can be measured and assessed. The result is a false sense of precision, and a great deal of very sloppy thinking.

These issues are well-discussed in Cydney Posner’s August 8, 2022 post on the Cooley law firm’s Pubco blog, entitled “What’s Wrong with ESG Measures?” (here). Posner’s article discusses in the detail the recent research paper issued by the Rock Center for Corporate Governance at Stanford University entitled “ESG Ratings – A Compass Without Direction” (here).
Continue Reading Zeroing In On The Problem With “ESG”

In a recent post, I noted that while companies may face investor and regulator pressure to address ESG-related issues, ESG-related actions can also entail operational and financial risks — and litigation risks, as well. In the latest example of a company whose ESG-motivated actions went awry, leading to securities litigation, Wells Fargo has been sued in a securities class action lawsuit after media reports that its efforts to diversify its work force led to fake job interviews, allegedly contrary to the company’s disclosures concerning its diversity efforts. A copy of the June 28, 2022 complaint against Wells Fargo can be found here.
Continue Reading Another Example of ESG-Related Actions Leading to a Securities Lawsuit

ESG is a hot topic. There is a general perception in certain circles – including the D&O insurance community — that ESG awareness and activism are essential  attributes of good corporate citizenship. There is even a perception in certain parts of the D&O insurance community that strong ESG credentials makes individual companies better D&O risks. However, as the securities class action lawsuit recently filed against U.K consumer products company Unilever shows, activism on ESG issues can, in fact, lead to D&O claims. The complaint in the Unilever action, which makes for interesting reading and arguably has important implications, can be found here.
Continue Reading Can ESG-Motivated Company Actions Lead to Corporate and Securities Litigation?

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?

It arguably is not news that the SEC is monitoring disclosure and related issues concerning ESG. After all, the agency’s enforcement division formed an ESG Task Force in March 2021. And as discussed here, the Task Force recently launched its first ESG disclosure-related enforcement action. Now, in the Task Force’s latest move, the agency charged an investment advisor with securities law violations related to the advisor’s claims that its fund investments had undergone ESG quality review, even though that was not always the case. BNY Mellon Investment Adviser, Inc., the investment adviser involved, agreed to pay a $1.5 million penalty to settle the charges. As discussed below, this latest Task Force action underscores the fact that the ESG cops are on the beat, and they are actively monitoring ESG-related disclosures. That could have important implications for future SEC enforcement activity.
Continue Reading Attention: The ESG Cops Are On The Beat

If there is one current topic that commands the attention of investors and other corporate stakeholders these days, it is ESG. ESG-related issues have of course previously led to securities suits and other types of D&O claims. However, amidst the current heightened focus on ESG, there is still a great deal of uncertainty about what ESG-related D&O claims might look like.

For that reason, the enforcement action that the SEC filed last week against the Brazilian mining company Vale, S.A. in connection with alleged misrepresentations the company allegedly made before the January 2019 collapse of its Brumadinho dam is noteworthy. Of particular interest to observers focused on ESG concerns is the fact that the SEC specifically alleged that the company “regularly misled local governments, communities, and investors about the safety of the Brumadinho dam through its environmental, social, and governance (ESG) disclosures.” The SEC’s April 28, 2022 press release about the Vale action can be found here. The SEC’s complaint in the action can be found here.
Continue Reading SEC Action Against Brazilian Mining Company Alleges ESG Misrepresentations