ESG

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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

In the following guest post, Ed Whitworth, the Head of Directors and Officers Liability at Inigo, and Yera Patel, Head of Casualty & Financial Lines Claims and Analytics for Inigo, summarize the results of a recent survey Inigo conducted of U.S. securities litigation defense counsel.. The original of the survey summary previously was published on Inigo’s blog, here. I would like to thank Ed, Yera, and Inigo for allowing me to publish the report summary on this site. I welcome guest post submissions from responsible authors on topics of interest to the 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: Inigo 2022 D&O Defense Survey

Nessim Mezrahi

In the following guest post, Nessim Mezrahi takes a detailed look at the factors driving D&O profitability and the securities class action loss mitigation steps insurers can take to improve profitability. Mezrahi is co-founder and CEO of SAR, a securities class action data analytics and software company. A version of this article previously was published on the PLUS Blog. I would like to thank Nessim for allowing me to publish his article as a guest post on this site. I welcome guest post submissions from responsible authors on topics of interest to this site’s readers. Please contact me directly if you would like to submit a guest post. Here is Nessim’s article.
Continue Reading Guest Post: SCA Loss Mitigation is Critical for D&O Profitability

Jeffrey Lubitz
Duncan Paterson

In the following guest post, Jeffrey Lubitz and Duncan Paterson take a look at the increasing numbers of class action lawsuits being filed against non-U.S. companies, and in particular how ESG issues may be the driving factor in multi-country cases. Jeff is the Executive Director of ISS Securities Class Action Services and Duncan Paterson is the Head of ESG Thought Leadership Program, ISS ESG. A complete copy of this article is available on the ISS Securities Class Action Services website, here. I would like to thank Jeff and Duncan 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 Jeff and Duncan’s article.
Continue Reading Guest Post: Growing Number of Non-U.S. Companies Facing Class Actions

As I noted a prior post, on August 6, 2021, the SEC, in a split vote along party lines, approved Nasdaq’s proposed listing guidelines requiring companies listed on the exchange to comply with board diversity requirements or explain their failure to do so. On August 9, 2021 a nonprofit directors’ organization called the Alliance for Fair Board Recruitment filed a petition with the Fifth Circuit Court of Appeals seeking to have the appellate court review the SEC’s order. The organization explained its move in an August 18, 2021 press release, stating that it sought to challenge the order because it “will compel many of our nation’s largest publicly traded corporations to illegally discriminate on the basis of gender, race, and sexual orientation” in selecting directors. The appellate petition can be found here. The August 18 press release can be found here.
Continue Reading Court Challenge to Nasdaq Board Diversity Rules Filed