Regulatory Developments

Public media reports have stated that the SEC’s Enforcement Division has been “sen[ding] document requests, including subpoenas” to asset managers in connection with ESG marketing. Apparently, these actions by the SEC’s Enforcement Division are targeting “conventional investment funds that have repurposed themselves as ESG funds.” Assuming the accuracy of these media reports, this would dovetail with the SEC’s focus on the phenomenon of “greenwashing,” i.e., when organizations make exaggerated or inaccurate claims about the degree to which their investments or activities are environmentally friendly. (The SEC had issued a proposed rule targeting greenwashing by investment funds in May 2022, and has also sent a significant number of comment letters inquiring about greenwashing — mainly to investment entities — concerning potential issues with their disclosures.) That the SEC may now be moving towards an “industry sweep” or similar enforcement action with respect to ESG issues and investment funds is consistent with their prior acts, and it appears to be a logical progression aligned with increasing enforcement scrutiny by regulators of this subject area.

Constitutional Climate Litigation

On August 14, 2023, a state court judge in Montana issued a long-awaited ruling in which the court found that the “Plaintiffs have a fundamental constitutional right to a clean and healthful environment, which includes climate as part of the environmental life-support system” and that “Montana’s GHG emissions and climate change have been proven to be a substantial factor in causing climate impacts to Montana’s environment and harm and injury to the [] Plaintiffs.” In particular, the court held that a recent Montana law “prohibiting analysis of GHG emissions and corresponding impacts to the climate, as well as how additional GHG emissions will contribute to climate or be consistent with the Montana Constitution . . . violates [] Plaintiffs’ right to a clean and healthful environment and is unconstitutional on its face.” However, since this decision is grounded specifically in the Montana state constitution, which incorporates more far-reaching environmental rights than most — the Montana Constitution expressly states that “all persons . . . have certain inalienable rights [] includ[ing] the right to a clean and healthful environment” — the immediate practical impact of this legal decision in will be relatively modest in scope. Nonetheless, this court’s ruling has affirmed the litigation tactic of holding governments responsible for climate change as a vindication of individuals’ constitutional rights, demonstrating the viability of an alternative tactic when using the legal system to impact climate change issues.