From Columbia Law School's CLS Blue Sky blog, June 23:
The Securities and Exchange Commission (“SEC”) has signaled that it wants to increase enforcement against “greenwashing” – misrepresentation of a company’s environmental actions. It is not yet clear, though, whether these enforcement efforts will expand the risk of corporate criminal liability. In a new paper, I argue that they will, and that businesses should think about their risks regarding potential criminal fraud in the environmental area.
Setting the Stage for the SEC’s ESG Actions
Frustration with greenwashing has been growing as more and more money chases ESG investments. The term “ESG” – environmental, social, and governance initiatives – is frustratingly vague, as it can include everything from deforestation to diversity and inclusion to the ethics of lobbying. I focus here on climate change and the United States.
Norms around climate change are changing very fast. In 2021, 76 percent of Americans age 33 to 40 thought that climate change represented a serious risk to society. The investment community is responding. By the end of 2019, 564 actively managed U.S. funds had added ESG criteria to their prospectuses. Twenty-three of the funds had over U.S. $ 1 billion in assets.
As evidenced by the repeated failure to enact national climate change legislation by June 2022, the U.S. is still politically paralyzed over what our reaction to the issue should be. But there is plenty of money to be made from responding to the public’s feelings of urgency. And there is even more money to be made when companies tell the public – customers, investors, employees, and others – what they want to hear to get their money but do little, or none, of what they promised to earn it. That’s a recipe for fraud.
Will it be civil fraud or criminal fraud? I think it will be both....
....MUCH MORE
